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Commodity trading profit calculation
The opening bell rang at 9: ET, setting off the hullabaloo of trading on the crowded exchange floor while the closing bell sounded at 4 p.
ET, halting activity on the floor. Historically, some trading took place outside the regular trading session, but such activity was generally limited. However, as the number of venues has multiplied, most recently to include so-called alternative trading systems ATSs , activity during non-market hours has become more widespread.
The changes date back to the s, when new technology smoothed the way for the development of electronic communication networks ECNs , a type of ATS which generally uses computer technology to automatically match buy and sell orders. Add to that the proliferation of registered exchange trading venues and the growth of other types of ATSs, and you had a recipe for growth in trading outside of normal market hours. Trading activity that takes place early in the morning before the traditional session is commonly referred to as pre-market trading while trading that occurs after the 4 p.
Any activity that takes place outside of traditional trading hours is also sometimes referred to as extended hours trading, or simply after-hours trading. The differences between extended hours trading and regular session trading, however, include more than just timing. Pre-market and post-market trading is less liquid. Despite the increasing amount of pre-market and after-hours trading activity, that activity is still dwarfed by the tens of millions of transactions that typically take place during a normal trading session.
Those seeking to buy or sell securities in the early morning or evening may find comparatively fewer counterparties, making it more difficult to execute a trade at your desired price. Extended hours trading activity is often more volatile.
Because fewer trades occur during pre-market and after-hours activity, stocks may be vulnerable to wider swings. Stocks may also be subject to more volatility during extended hours trading because of the speed with which some investors react to major events, such as earnings announcements, which often take place before or after standard trading hours. For example, a firm that reports disappointing earnings after the market closes may see a rapid decline in its share price during after-hours trading in reaction to the headline numbers.
Once investors have time to review more information about the results, however, trading may become smoother when regular trading hours resume. Markets may be unlinked.
The price displayed on one after-hours trading venue may vary from the price currently available on other after-hours trading venues. The share prices recorded at 4 p. These official prices are what investment funds use to calculate the value of their holdings at the end of a day. The after-hour trading activity may also not reflect the price at which the stock opens in the morning. Stock options generally do not trade pre-market or after-hours , though there are some exceptions.
Your brokerage firm may set specific parameters for pre-market trading and after-hours trading. Rules among brokers about when and how clients may participate in pre-market and after-hours trading may vary. A broker, for instance, may impose set times for after-hours trading — from 4 p.
Brokers may also prohibit pre-market and post-market trading completely. Check with your broker to determine your choices for trading outside of traditional market hours.