Have you ever seen a positive news report about a particular company and thought to yourself ‘I’m going to buy some shares into this company’...only to find by the time you’re able to buy shares the price of the shares have sky rocketed?
There’s a reason for that and quite often it’s because of something called out-of-hours-trading.
For us ordinary retail investors, we can trade on the stock market between the opening and closing times. For UK investors, that’s between 8.30am and 4pm.
A lot of the time when companies report any news, they do so after the markets have closed. This means retail investors must wait until the next day to buy shares or sell shares. But large institutional investors are still able to trade after hours this after-hours trading can impact the share price the next day. This is why sometimes a share price will close at a particular price at the end of the trading day, but the next day the share price will be different. Even if retail investors haven’t been trading, institutional investors may have been trading and therefore affecting share prices.
Most trading platforms, however, do not enable investors to trade outside of the regular stock market opening times. However, one strategy that most platforms do allow is to set ‘limit orders’. This can be used to protect yourself from suffering unexpected bad prices during after-hours market trading.
P.S If you enjoy learning about the stock market and want to learn how to trade on the stock market, consider signing up to the 30 Day Trading Programme. The programme is free and you can learn at your own pace.