After-hours trading homework can cut the scary from real-time markets. Plus, some markets remain open after traditional market hours.
The markets are closed. Is it time to pull out a good bottle of red wine and kick back in front of the fire? Maybe. But some traders will say that the trading day is just getting started when after-hours trading begins.
After-hours trading prep can be invaluable in helping analyze your past performance, study potential opportunities, and plan the specifics of future trades without the turbo-charged emotions and excitement that the day session can provide.
Unless you’re an intraday scalper, many traders aren’t well-served by ad hoc, unplanned trade entries during active market sessions. You’ve probably heard it before, but it bears repeating: Consider taking the time to plan out your trades with specific entry points, targets, and stop-loss levels before you enter a position. The extended-hours trading sessions, when things tend to be less hectic, are a good time to make these preparations.
“Decide what to trade, when to trade, how much to trade, and when to exit," says Pat Mullaly, education coach, TD Ameritrade. “The middle of the trading day is not the time to research stocks and define entry, position size, and exits. You become rushed, uncertain, and prone to mistakes. Trading confidence could suffer."
Establishing and following a set routine after the markets are closed and during the after-hours trading of the New York Stock Exchange (NYSE) session could potentially produce more focus, planned and thoughtful trade entries, and perhaps even an extra dose of self-confidence. Pro athletes often prepare for hours before a big game, and that could be a good example for an active trader to follow ahead of a trading session.
Learn more about extended-hours trading.
"Professional athletes all have a certain set of skills, yet they all have routines they use to focus themselves on the task," Mullaly says. “Good practice habits and routines are part of the process."
There are several things to consider when developing a routine that works for you. Perhaps one of the most important factors is consistency. If this routine can become habit, you can work through the points quickly and efficiently and help keep your trading on task. Think of it as a mini “performance review" that you give to yourself, perhaps during after-market trading as you prepare for the next day.
Mullaly suggests four things a trader can incorporate into an after-hours trading routine:
Then, after the next trading day is over, do it again. Developing a trading routine to study both your performance and plan for potential market entry points can become an easy habit to embrace in the after-market trading hours. “Developing and sticking with this routine removes you from the daily noise, and allows for objectivity and continued improvement," says Mullaly.
Sometimes that trading opportunity hits during the overnight hours. For example, there’s a round-the-clock world of futures, options, and currency products available to qualified account holders. Available products include:
Plus, qualified TD Ameritrade account holders can trade select securities 24 hours a day, 5 days a week (excluding market holidays). Such extended hours overnight (EXTO) orders are available 24/5 in the thinkorswim® platform and TD Ameritrade Mobile Trader app.
To take your trading game to the next level, prepare like a professional. Professional athletes, musicians, and lawyers know that the process of preparation is key. “A trader’s edge lies not only in skill and probabilities, but also in their ability to execute on the plan," Mullaly says. “Having an established routine when the markets are closed allows you to objectively consider prior mistakes and successes, enhancing your trading abilities and skills." And if in all this after-hours preparation, you spot a potential opportunity? There may be a market open for you in those off-hours.
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A stop order will not guarantee an execution at or near the activation price. Once activated, they compete with other incoming market orders.
When placing an extended-hours overnight trade, you may only place unconditional limit orders to buy or sell. Additionally, you may only take the long side of the trade (no short selling). There may be greater liquidity risk for orders placed during this time period as outlined in the Extended-Hours Trading Session Rules.
Extended-Hours Trading is subject to unique risks and rules that are different from the normal trading session. Please review the Extended-Hours Trading rules before you decide to participate.
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