You may be new to the stock market or perhaps you’ve been trading for some time and noticed some brokers offer extended hours trading but are not sure what this is or when to use it. This article will walk you through what extended hours trading is and show some example of how to take advantage of it in your Ally Invest or Webull accounts.
What is Extended Hours Trading
The U.S. stock market is open Monday through Friday from 9:30 AM to 4:00 PM EST, which gives market participants six and a half hours of trading time each day. Many brokers, TD Ameritrade and Webull included, offer their clients the ability to place trades for many stocks outside of these standard trading hours, known as extended hours trading. The extra hours can vary a bit depending on the broker but TD Ameritrade (thinkorswim) and Webull both offer extended hours trading in the morning from 8:00 AM to market open and then in the evening from market close to 8:00 PM.
Additionally, TD Ameritrade also offers round’ the clock trading (24 hours a day) Monday through Friday for select ETFs.
What is Day + Ext
Day + Ext simply means that the order will be active today during regular market hours (9:30 AM - 4:00 PM EST) plus during todays extended hours (these vary by broker, but usually are 8:00 AM - 9:30 AM and 4:00 PM - 8:00 PM EST). Once this time period is over, the order will be automatically cancelled if it was not executed.
What is GTC + Ext
GTC order stands for Good Till Cancelled order. This means that the order will be active until you cancel it. GTC + Ext means that the order will be active during both regular market hours and extended hours until you cancel it.
How Do I Place a Day + Ext Order on Ally Invest
To place an order during extended hours trading in your Ally Invest account, in the main menu you will go to Trading -> Stocks and ETFs -> Extended Hours Trading. Then you will enter the order details like you would during standard market hours (i.e. ticker, quantity of shares, etc.).
For time-in-force you want to select either “Day + ext.” or “GTC + ext.”. The day + ext. version means that your order will be active that day from 8:00 AM until 8:00 PM, and GTC + ext. means that your order will be good for those same hours, but will stay open on each subsequent day until it is either filled or the order expiration date is reached.
For Duration you want to select either “This Session only” or “Good Until Cancelled”. The “This Session only” version means that your order will be active that day from 8:00 AM until 8:00 PM, and “Good Until Cancelled” means that your order will be good for those same hours, but will stay open on each subsequent day until it is either filled or the order expiration date is reached.
You will also notice that you cannot place market orders during extended hours trading; you must choose a limit order and indicate a limit price (we’ll discuss why later).
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How Do I Place a Day + Ext Order on Webull
Using the same example, let’s say we want to buy 100 shares of SPY during extended hours trading on Webull. We would create the below trade ticket, which is very similar to what we did on Ally Invest, except the order types are a little different. You can choose from Pre Mkt, After Mkt, or Day+EXT – we’ll walk through the differences between these three.
Pre Mkt means your order will be active from 4:00 AM to 9:25 AM that day and will be cancelled if it’s not executed within these hours. Similarly, an After Mkt order will be active only that day between the hours of 4:00 PM and 8:00 PM. A Day+EXT order will be active for the entire normal market session and extended session, from 8:00 AM to 8:00 PM for that day only. If it’s not executed during these hours it will be cancelled. And just as with Ally Invest, you Webull extended hours order must be a limit order.
Benefits of Extended Hours Trading
The ability to place orders outside of normal market hours is without a doubt a great option to have because it gives you the flexibility to act and react faster than others who may be constrained to the standard market session. This option is perhaps most useful when breaking or significant news affecting your positions comes out before or after the normal trading session. Being able to adjust your position quickly could help you secure profits or avoid further losses as opposed to waiting until the regular trading session begins and when the stock price is potentially very different.
Risks of Extended Hours Trading
Despite the benefits of extended hours trading, the biggest downside is the lower liquidity. There are far fewer market participants placing trades (and therefore also taking the opposite side of your trades) outside of normal market hours, which often leads to higher bid/ask spreads and more volatility when impacting news is announced.
Day + Ext Trading Hours Order Conclusion
To summarize, despite the lower liquidity and higher volatility that is common outside of normal market hours, having the ability to act and react outside of the normal 9:30 AM to 4:00 PM timeframe is a valuable option to keep in your back pocket. You never know when the outlook for your investments could change dramatically and instantly, but having the ability to react with almost the same speed is important for your portfolio’s profitability.
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