Risks of extended hours trading

Liquidity is the ability to buy and sell stocks quickly at a good price. Generally, the more orders that are available in market, the greater the liquidity. Fewer people trade outside regular hours, so your orders may take longer to fill or may not fill at all. It is usually easier to buy or sell stocks during the regular trading hours.

 

Volatility is the frequency and size of price changes in stocks. The higher the volatility of a security, the greater its price changes. There is usually greater volatility in extended hours than in regular hours. When trading extended hours, you may receive a worse price compared to when trading during the regular hours.

Spread is the difference between a stock's buy and sell price. Lower liquidity and higher price volatility in the extended hours session may lead to wider spreads. Spreads are usually lower in the regular hours.

Companies often release important information outside the regular trading hours, such as earnings releases, mergers and acquisitions, dividend announcements, and other market-moving news. These announcements may cause significant price changes. When combined with lower liquidity and higher volatility, this worsens the trading conditions compared to regular trading hours.

Different brokers may use different extended hours trading systems. Prices in one extended hours trading platform may be different from others. You could receive a worse price in one Extended Market Trading system compared to another.

The prices of stocks in extended hours trading may not reflect the prices either at the end of regular trading hours, or the regular session opening the next day. This means if you buy or sell during extended hours, you might not get the best price compared to trading during regular hours.