With the rise of online brokers and ease of access to information, retail investors like you and me now have unprecedented access to the stock market and other financial markets.
We can trade stocks right from the comfort of our homes and make transactions around the clock with few restrictions. The regular trading hours for the U.S. stock market are 9:30 AM to 4:00 PM ET, Mondays through Fridays. But, depending on your brokerage firm, you may have access to extended hours.
Although the physical start market is closed on the weekends, there are ways to get around that through using online platforms and leveraging time zone differences. Below, we will cover the stock market hours in detail and ways to trade on the weekends.
- The U.S. stock market operates from 9:30 AM to 4:00 PM ET Mondays to Fridays.
- While technology has allowed investors to have more flexibility to trade outside of regular market hours, retail investors cannot buy stocks on the weekends and federal holidays.
- There are several benefits and risks to trading outside of traditional market hours to consider.
- Alternative assets that allow 24/7 trading include gold, forex, and cryptocurrency.
Overview of Stock Exchanges
The traditional stock exchange allowed buyers and sellers to meet and trade shares of publicly traded companies at physical locations. Major financial centers are located in New York, London, Hong Kong, Paris, Tokyo, etc.
Each location has limited trading hours. For example, the New York Stock Exchange (NYSE) is open for investors from 9:30 AM to 4:00 PM ET five days a week. It is closed on the weekends and federal holidays.
Weekdays and Weekends
The concept of a five-day business week (Monday to Friday) and a two-day weekend (Saturday and Sunday) has existed across the globe since the 1900s. The U.S. and many other foreign stock markets have approximately the same trading hours but in each market’s local times. For example, the Hong Kong stock market is open from 9:30 AM to 4:00 PM, while the French market is open from 9:00 AM to 5:30 PM.
While the U.S. market has limited hours, since 1985, some brokerage firms have started allowing investors to trade during pre-market hours from 4:00 AM to 9:30 AM ET and after-hours from 4:00 PM to 8:00 PM ET.
Why Are Stock Markets Closed on the Weekend?
Though the majority of current-day stock trades get handled by electronic communications networks (ECNs) that can operate around the clock, for the most part, the stock market remains closed on the weekends. There are a few reasons for this:
1. Following a Stock Market Tradition
Before the widespread adoption of technology, the stock markets closed on the weekends because floor traders and professional money managers could not work 24/7. The weekends gave them a break from work to recuperate. However, nowadays, having floor traders at physical locations, such as the NYSE, is mostly symbolic.
Functionally, there is no reason that the stock market could not operate 24/7 today. But, because most professionals do not work on the weekends, the market tends to be less liquid since they are not taking the other side of trades. With less liquidity, the markets become more volatile, and the spread between the bid and ask grows wider, making it harder for retail investors to trade.
2. Much Needed Buffer
Another reason why the stock market is closed on the weekend is to create a buffer against widespread panic and crisis. If something terrible happens, the government can work behind the scenes with corporate entities to discuss stop-gap and bailout scenarios. That way, the market can digest the news while the government works to stop the bleeding in the meantime.
During the 2008 financial crisis, the U.S. government used the weekends to save the financial system by convincing Goldman Sachs and Morgan Stanley to serve as bank holding companies. These types of stop-gap procedures and bailouts often get discussed over the weekends before they get implemented.
Trading Outside of Regular Trading Hours
There are three main ways to trade outside of the standard trading hours:
1. Pre-Market and After-Hours Trading
In the past, trading outside of the regular market hours was limited to institutional investors and high net worth individuals. However, with the rise of ECNs, the average investor can now trade during pre-market and after-hours sessions.
ECNs, such as Instinet, SelectNet, Archipelago, and NYSE Arca, connect individual traders and major brokerages to allow them to trade stocks directly with each other. They are computer-based systems that facilitate trading both during and outside of traditional market hours. ECNs do this by matching and executing orders based on the best available bid and ask quotes from market participants.
Most brokerage firms offer pre-market and after-hours services for their customers, though each exchange has its defined hours. Additionally, some brokers will only offer limited access, while others may offer trading through slower computer networks, resulting in slower trade execution speeds.
When you place orders during pre-market or after-hours, your order will go to an ECN, which comes with limitations and risks. For example, investors can only use limit orders to buy or sell shares of stock. That means you cannot use custom orders, such as stop-loss orders. Additionally, orders placed during these hours are only good for that session, so if you are still interested in the stock when the session ends, you will need to place a new order when the market opens the next day.
To execute a trade outside of market hours, log into your brokerage account and select the stock you want to buy or sell. For example, if you have a Webull account, make sure to choose “Limit” as the order type and “Include Extended Hours” under trading hours. Some brokers will charge additional fees, so be sure to check for additional charges if you do not want to pay extra. Once you place your order, your broker will send it to the ECN it uses, who will then attempt to match your order to someone on the other side of the trade. Once it finds a match, your trade will get executed.
While there is some stocks activity over the weekends, I have yet to find a broker that provides real 24/7 access. Currently, the stock trading platforms I have come across will allow retail investors to place buy and sell orders over the weekend, but they will not execute until the pre-market hours on Monday. One reason for this may be a result of the wide bid-ask spread resulting from low liquidity over the weekend.
3. Leveraging Time Zone Differences to Trade Stocks
Investors who want to trade around the clock can leverage time zone differences using a site such as World Time Zone to find the status of open markets around the world. By owning portfolios across the globe, you can theoretically trade 24/7. Asian markets are open on Sundays and close on Thursdays in local U.S. time, for example.
While most of the world operates on the traditional 9-5 workday, not every country starts and ends their week on Sundays. Some Middle Eastern countries use the Islamic calendar, which starts the week on Fridays. Thus, they operate from Saturday to Wednesday rather than Monday to Friday. An example is the Dubai Financial Market (DFM), which is open from Sunday to Thursday.
To trade stocks from other countries, you need a brokerage account that has access to stocks all over the world, such as Interactive Brokers (IB).
Benefits and Risks of Trading Outside Regular Trading Hours
The main benefits of trading outside traditional market hours are (1) convenience and (2) the ability to act on new information.
If you are not a professional trader or have other obligations, having the ability to trade during pre-market or after-hour sessions gives you the flexibility to make investment decisions on your own time. Part-time investors typically get limited by their responsibilities during the day, such as taking care of their children or working a day job.
Usually, I have a limited amount of time to check my stocks due to other obligations. So, sometimes I will stay up until 1:00 AM PT to watch the pre-market activity or wake up at 6:00 AM to check my stocks at market open. Having access to the markets from 1:00 AM to 5:00 PM PT allows me to juggle work with my investment goals.
Trading outside of the regular market hours also allows investors to act on new information quickly. I regularly check which companies have earnings releases soon and scan the news for market information. I also watch YouTubers, such as Meet Kevin and Invest Answers, regularly to learn about their market analyses and use them to supplement my individual analysis. Note that most YouTubers are not financial advisors so always take their calls with a grain of salt and do your own research as well.
While trading outside of the traditional trading hours has its benefits, it also comes with several disadvantages.
One of the main disadvantages is execution risk, which is the risk of an order not getting processed within the day. If there is a lack of volume for a particular stock, there is a chance your order will not get executed in the ECN market.
Generally, when there is low volume, that leads to high volatility as larger players such as hedge funds and whales tend to have an outsized influence on the markets. That opens up the possibility of wide fluctuations in price action. Additionally, the spread between the bid and ask will increase, so buyers and sellers have a harder time meeting in the middle.
While not every brokerage firm will charge fees for trades placed during pre-market and after-market trading, some do. If you are using margin, the additional costs can eat away at your returns. As we mentioned earlier, you also face a limited number of options for the types of orders you can place, which can be a disadvantage if you are used to custom orders.
Tips to Consider
If you want to place trades during pre-market or after-market sessions or on the weekends, there are a couple of best practices you should keep in mind:
- Set limit orders based on your price targets to limit any downsides of higher volatility.
- Look for stocks with high volume and avoid low volume stocks.
While the stock market is not open 24/7, other financial markets are, including gold, forex, and cryptocurrency. Depending on your risk tolerance and financial goals, you have many alternative assets you can invest or trade at any time. We recommend looking at all your options to diversify your holdings and spread your risk across different assets.
Gold has been used as a mainstay currency and store of value for thousands of years, though Bitcoin is increasingly considered digital gold. If you are looking for a stable and secure asset to invest and trade, consider buying gold. If you are looking for a high-risk, high-reward assert, park some of your money in crypto.
Because of time zone differences, foreign exchange markets are open 24/7 in various parts of the world. Investors generally use forex as a hedge against foreign currency and interest rate risks. Though, they may trade forex to speculate on geopolitical events as well.
Outside of stocks, I invest in crypto to diversify my investment portfolio and achieve higher returns. Because I have a relatively higher risk tolerance and want to grow my wealth as fast as possible, I currently do not invest in bonds, gold, or other commodities as they are more stable but have lower returns.
The Bottom Line
More and more stock exchanges are allowing their customers to trade outside normal market hours. While there are many benefits to trading in pre-market and after-market sessions and weekends, off-hour trading also comes with risks. Before you start trading outside of regular market hours, weigh the pros and cons carefully.
Personally, I do not trade stocks on the weekends to give myself a break and recharge for the week ahead. Unless you are an advanced trader, consider staying away from buying and selling stocks when the market is closed to let your mind rest.