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Can You Trade ETFs in the After-Hours Market? (Insights)

Last Updated on 10 February, 2024 by Trading System

The after-hours market is a great place for people who want to trade securities based on fresh information. Prior to the 1990s, the after-hours market was only available for institutional investors. However, the advent of digital exchanges and brokerages has finally allowed the individual investor the freedom to trade in the after-hours market.

You can trade ETFs in the after-hours market, since ETFs are traded on an exchange and therefore behave like stocks. However, trading ETFs in the after-hours market carries additional risks. Before you begin trading, it is important to acquaint yourself with these risks.


Can You Trade ETFs in the After-Hours Market? (Insights)

How You Can Trade in the After-Hours Market

Usually, your broker should be able to assist you with this. Technology has been of immense help to the modern trader. Because of brokers now being able to interact through Electronic Communication Networks (ECN), they can find willing buyers and sellers with ease. As such, it is possible for them to link these buyers and sellers with one another for trading stocks and ETFs even after the market has closed.

Although not a universal rule, most brokerages allow after-hours trading between 4 and 8 p.m. On top of this, you will also be able to trade before the market opens between 7 and 9:30 a.m. This is known as pre-market trading and can be a great place to find new opportunities based on news from last night.

One important thing to remember is that after-hours trading of ETFs is different from the standard market hours. There are additional factors involved in each trade and trading, and in general, it is riskier. As such, here are a few benefits as well as a few drawbacks of purchasing/selling ETFs during the after-hours trading.

ETF in After Hour Market
ETFs After Hours Market

Why You Should Trade ETFs and Stocks in the After-Hours Market

The landscape of the after-hours market is vastly different from the regular trading session. Here are a few reasons why trading in the after-hours market might be beneficial for you:

New Information

It is possible that there might be new information available during the evening which creates an opening in the market. As such, waiting to trade until the market opens the next day simply might not be good enough. This is when you can use your brokerage and trade an ETF/stock in the after-hours market.


The after-hours market generally has very few active traders. As such, ETFs and securities, in general, are a lot more volatile during this period. This means that a lot of ETFs will fluctuate up and down, with some of them maybe being priced a bit below their intrinsic value.

Extreme losses which occur only due to general market volatility and not due to an external factor are sometimes recouped during the first few hours of the next trading session. As such, traders can go hunt for ETFs during the after-hours market and make some serious short-term profits within the next 24 hours. Just make sure that there isn’t another reason why the security lost its value!

Ease of Access

Many people, especially those who have full-time jobs are unable to trade during the day due to other commitments. As such, having access to the market during the evening hours can be of immense benefit to them.


Disadvantages of Trading ETFs in the After-Hours Market

The after-hours market does not have nearly the same level of activity as the market hours. There are many good reasons for that, so let’s take a look at some of them.

Some Brokerages Charge Fees During After-Hours

Although most brokers do not charge you anything if you want to trade stocks or ETFs in the after-hours market, some brokers do. If you are someone who is planning to buy a lot of stock of a company, then the fee could really add up.

For example, even an additional fee of $0.1 per share can mean that you are charged $10 for every 1000 shares you purchase. This can really add up over time and cause your portfolio to suffer.

Increase in Volatility

Compared to the standard market time, after-hours trading has very few participants. The vast majority of the people simply stop trading as soon as the bells ring. As such, some ETFs and stocks often end up becoming more volatile.

This volatility does not usually carry over to the morning session since the sheer influx of buyers and sellers to the market usually brings stability. If you are trading ETFs in the after-hours market, be ready to stomach some quite severe fluctuations within a matter of minutes.

Wider Spreads

Since the number of traders in the market is low, the volume of ETFs traded in the after-hours market is quite low as well. Because of the low volume, the spread is wide. The spread is essentially the difference between the current buying price in the market and the current selling price.

The wider the spread of a security, the lower your chance of being able to execute a trade at a price that works for you. More often than not, there is a possibility of you overpaying for an ETF.


Institutional Investors Rule the World

When it comes to trading ETFs in the after-hours market, the institutional investors are the king. Once the market has closed, most of the individual as well as the smaller trading firms usually close up shop and go home. The after-hours market is thus mostly made up of institutional investor, but individual investors can also be found.

The main problem with this is that institutions have a lot more resources as well as manpower at their disposal. While it can be difficult to win a head to head battle with an institutional investor, it is still possible.


When Should You Trade in the After-Hours Market

For most people, there is no reason to trade in the after-hours market if they can avoid it. Unless you see a development that presents an opportunity that is simply too good to pass up, or you cannot trade in the morning for whatever reason, try to avoid the after-hours market.

Also remember that instead of trading ETFs, some people might be better off trading futures contracts. Futures contracts can be traded at nearly any time and offer a wealth of benefits over ETFs. Here are a few of them:

  • There are no management fees associated with futures contracts since the contract is based on an index.
  • Some of the futures contracts are much more liquid than ETFs. A good example of this is the E-mini S&P 500 future which is much more liquid than any ETF you can find that tracks the S&P 500.
  • Futures are also more beneficial for day traders as the fees associated with trading them are a lot less than ETFs.
  • You can trade futures nearly 24 hours a day.
  • Futures can be traded on much higher margins, meaning that you can make more profit off of them if you know what you are doing.


Bottom Line

You can trade ETFs in the after-hours market since they function just like stocks. However, trading in the after-hours market carries with it a lot of benefits as well as risks. As such, you should be careful before you decide to trade in the after-hours market. Unless you absolutely need to, it might be better for you to stick to the safety of the normal market hours.

Alternatively, you can also trade futures as they often track the same markets as the ETFs. Futures contracts have a lot of inherent advantages over ETFs but trading them on margin may be risky since your losses are amplified along with your winnings!


How can one trade in the after-hours market, and what role does technology play?

Brokers can assist by utilizing Electronic Communication Networks (ECN), linking buyers and sellers. Technology enables traders to engage in after-hours trading between 4 and 8 p.m., extending opportunities beyond regular market hours.

When should one consider trading in the after-hours market?

Trading after hours is advisable if there’s a compelling opportunity or if morning trading is not feasible. However, for most individuals, it’s recommended to avoid unless necessary due to the associated risks.

What are the advantages and risks of trading futures contracts compared to ETFs?

Futures contracts have no management fees, are more liquid in certain markets, have lower trading fees, and can be traded on higher margins. However, trading on margin involves amplified losses along with potential winnings.

If you enjoyed this article you might also like our other articles answering common questions traders have!

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