Trading after hours can help traders react to news fast. Sometimes company managers release earnings reports after the market has closed. If you had no access to after-hours trading, you wouldn’t be able to place an order based on such news. So, as a Robinhood trader or a prospective customer, you need to know: “Can Robinhood Trade After Hours?”
Yes, you can trade after hours on Robinhood, but any orders you set will be executed as soon as the market opens again. More specifically, you can trade for 2 more hours after the market closes and 30 minutes before the market opens again.
In this article, I will help you understand what after hours trading usually is and what exactly Robinhood offers when it comes to that. I will also outline the pros and cons that come with trading after hours.
Sounds good? Let’s get started…
After-Hours Trading and Robinhood
Most of the time, after-hours trading is trading that occurs after normal market hours which usually are from 9:30 AM to 4:00 PM (ET). This involves electronic communication networks (ECN) that match buyers and sellers without the need for a stock exchange.
For a long time, trading after hours was only accessible to institutional investors. In 1999, however, that changed when ECN services started becoming available to more and more retail investors.
Though Robinhood does offer after-hours trading, it’s important for you to understand that your order will not be filled until the market opens again.
You might be able to secure a price that you can trade a security on, but the transaction doesn’t take place right there and then. You will have to wait for the market to open again.
Also, note that the reason that the prices of stocks continue to go up and down after the market closes is because of the ability traders have to set orders outside the normal trading hours.
The supply and demand of a stock are still affected by the respective sell and buy orders that are set. Although the trading activity is slower after hours, it still tends to move the price up and down.
The Pros and Cons of After-Hours Trading
Let’s now see the advantages and disadvantages that after-hours trading comes with…
- You can still enjoy trading even though you work a regular 9 to 5 job
If you have a 9 to 5 job, then trading becomes a little bit difficult since the market is open from 9:30 to 4. After-hours trading can give you the chance to still participate in the market even though you will not be able to see your orders filled until the market opens again.
That benefit also applies if you work irregular shifts and you don’t live in America.
- You can react to news even when the market’s closed
Sometimes, managers of publicly traded companies announce earnings after the market has closed. If you want to secure an attractive price for their stock before the market reacts to the news, you will have the opportunity to do so because of after-hours trading.
Of course, this advantage won’t be an advantage for all. For example, long-term investors won’t care about reacting fast to such news. You need to be fairly active trader so you can make use of after-hours trading from that aspect.
Let’s now take a look at all the disadvantages and issues after-hours trading comes with…
- Lack of liquidity
This is not always a huge issue but it often applies to all stocks. As you can expect, fewer traders participate in after-hours trading than those who trade during market hours. So trading volume will be predictably lower and you might have difficulties fulfilling an order at the price you want.
- More volatile prices
This problem arises from the previous one. Lack of liquidity makes prices more volatile and it might cause price fluctuations to be more severe.
- Broker Restrictions
Brokers often limit the type of orders you can set in after-hours trading sessions. For more information on what Robinhood allows, check out their page.
As I told you, Robinhood allows you to trade after normal hours, but only for 2 hours after the market closes. Further, your orders will be executed during normal hours, although you still get to secure a price you want.
Just remember that there are risks involved with after-hours trading and you should be aware of them before you bite the bullet. At the same time, after-hours trading is very convenient for someone who is an active trader and for anyone whose schedule doesn’t allow them to trade during market hours.
Did you enjoy this article? More importantly, did it answer your question? If yes, please make sure to share it with others on social media. You can also leave a comment below and I’ll get back to you as soon as I can.
Thanks for reading and I’ll talk to you next time!
Over the past years, I have discovered several tools and products that have helped me tremendously on my path to financial freedom:
P.S.: The links below are affiliate links, which means I receive a small commission at no extra cost to you when you sign up for one of the services. Thank you for your support!
1) Take a look at M1 Finance, my favorite broker. I love how easy it is to invest and maintain my portfolio with them. I can set up automatic transfers, rebalance my portfolio with one click and even borrow up to 35% of my assets at super low interest rates!
2) Fundrise is by far the best way I've found to invest in Real Estate. You can diversify your portfolio by investing in their eREITs or even allocate capital to individual properties (without the hassle of managing tenants!).
3) If you are interested in crypto, check out Gemini. I've started allocating a small amount of assets to the growing crypto space and Gemini has just been a breeze to use. Once you register, make sure to also open an Active Trader account to buy crypto at the lowest fees on the market (just 0.03%!).
To see all of my most up-to-date recommendations, check out the Recommended Tools section.