How Does After Hours Trading Work, What is After Hours Trading And When Can You Use It?
How does after hours trading work, and how can you effectively use the to get lower stock prices on the buy side of the market, and higher sell prices on the sell side of the market. After hours trading is something that such a small percentage of traders and investors actually initiate in, that it is almost rarely talked about in the world of finance. With this being said, it does happen, and is usually done by way of a pre market order placed as a limit order in order to try and get a lower buy price before the market opens, allowing you to lower your total average cost basis and take more capital gains as they arise. Totally off topic on this one but a little known fact about buying stocks through brokerages that have either commissions, one time trading fees, or markups, is that you don’t need to write these off on your taxes, since they are already factored into your total cost basis, giving you what is essentially an automatic tax write off from these buy orders. So lets say that you purchase 10 shares of Apple at $200, and the brokerage charges you 1% in fees for a $200 trading charge. In this case, you did not buy these 10 shares of Apple for $2,000, you purchased them for $2200, and this would be reflected in your cost as such. So when you go to sell these for $5,000 some day, you only pay capital gains on $2800, not $3,000, hence the “tax write off” for trading commissions is already factored in to your cost basis here. And so, without further ado, here’s how after hours trading works, for more information, be sure to comment down below or to subscribe to our blog for additional details and information.
Among the most common securities being purchased right now include the following:
Spider S and P 500 Index Funds
Exxon Mobile due to its cheap price
Cheap Oil stocks
Global Index Funds
Chinese Index Funds
And much more, read on or subscribe to our blog for additional details and information.
So How Does After Hours Trading Work? Here’s What Actually Happens
So typically trading stocks after hours is something that is setup by the exchanges, so I believe something like the NASDAQ and the New York Stock Exchange allow for after hours trading, while other indexes or exchanges may not. Some of the benefits of after hours trading may include the following:
- Pre market orders and after hours buying prices
- The ability to buy before the rush
- Buying while most people are sleeping
- Having more time to think and place trades
And many more advantages. For the most part, the main basket of stocks is not going to actually be available for after hours trading, so say like your Disney, Walmart, Google, Exxon Mobile, are not something that you can do as a pre-market or an after hours order. However, just about every single pink sheet or over the counter stock that I know of does allow pre market trading, so this is something to keep in mind if you are formulating an active trading strategy.
How Does After Hours Trading Work? Why You Should Probably Steer Clear of This
So once again it is almost entirely up to the exchanges to decide which stocks are able to be traded in after hours or pre trading markets. Typically, it is not going to be your high class blue chip stocks that you can trade before the market opens, and instead its something along the lines of penny stocks, OTC stocks, pink sheet stocks, and more obscure companies like say low end bio tech companies and the like. And so, for the most part, the savvy investors of the world are not worrying about after hours or pre market trading hours, and instead are just focusing on holding their index funds for long periods of time, and on totally diversifying their portfolios.
Final Thoughts on After Hours Trading, The Details on How This Works
And so, that’s pretty much the gist of at least what I know about pre market and after hours trading. What did you think of this blog post and have you ever done any pre or post market trades yourself? Leave a comment down below and let us know and remember to subscribe for additional details and information, it is always fun to see additional feedback from people in the finance world, so any comments are welcome! Till next time, you heard it first right here at Inflation Hedging.com.
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