How Do I Enable After Hours Trading on E*TRADE: A Step-by-Step Guide?

After hours trading offers an opportunity to react to news events and other factors influencing stock prices outside the standard market hours. For both traders and investors, understanding this extension of trading time can be crucial for gaining an edge in the market. This article aims to provide a comprehensive guide to after hours trading, specifically on the ETRADE platform. We will explore everything from the basics of after hours trading to enabling it on ETRADE, including best practices and potential risks.

What is After Hours Trading?

Definition and Explanation

After hours trading refers to the buying and selling of securities on major exchanges outside regular trading hours. The typical U.S. stock market hours are from 9:30 AM to 4:00 PM Eastern Time. After hours trading generally occurs from 4:00 PM to 8:00 PM Eastern Time.

Differences from Regular Trading Hours

Unlike regular trading hours where order matching is highly automated and swift due to high liquidity and volume, after hours trading usually involves fewer participants. This can lead to greater volatility, wider spreads, and less liquidity.

Advantages and Disadvantages

Advantages:
1. React to News: Traders can immediately react to news events released after the market close.
2. Flexibility: Provides additional hours to trade, beneficial for those who are busy during regular hours.

Disadvantages:
1. Lower Liquidity: Fewer participants can make it harder to execute trades at desired prices.
2. Greater Volatility: Prices can swing more wildly due to fewer trades and lower volume.
3. Wider Spreads: The bid-ask spread can be significantly wider, making it costly to trade.

Understanding E*TRADE

Introduction to E*TRADE

E*TRADE is a leading online brokerage firm that offers a wide variety of financial services and tools designed to help investors manage their investments effectively.

Key Features and Services

• Robust Trading Platform: Offers a user-friendly interface and advanced tools for analysis.
• Research and Data: Provides comprehensive market data, research reports, and analytical tools.
• Mobile Trading: Enables users to trade from anywhere using their mobile devices.

Types of Accounts Offered

• Brokerage Accounts: For general stock trading and investment purposes.
• Retirement Accounts: Includes IRAs and other retirement accounts for long-term investing.
• Managed Portfolios: Offers professionally managed portfolios for a hands-off investment approach.

Enabling After Hours Trading on E*TRADE

Prerequisites for Trading

Before you can begin after hours trading on E*TRADE, ensure that:
1. Your account is funded.
2. You understand the risks and differences associated with after hours trading.

Step-by-Step Instructions

Step 1: Log into Your E*TRADE Account

Visit the E*TRADE website and log in with your username and password.

Step 2: Navigate to Account Settings

Find the ‘Account Settings’ option in your dashboard menu.

Step 3: Find After Hours Trading Option

Look for the option that allows you to enable after hours trading.

Step 4: Enable the Feature

Toggle the after hours trading feature to ‘On.’

Step 5: Review and Confirm Changes

Review the terms and conditions related to after hours trading and confirm your changes.

Troubleshooting Common Issues

• Feature Not Available: Ensure your account type supports after hours trading.
• Error Messages: Verify if you have sufficient funds or if there are restrictions on your account.

How to Trade During After Hours

Understanding After Hours Market

The after hours market operates using an electronic communication network (ECN), which matches buy and sell orders.

Order Types Available

• Limit Orders: Most commonly used during after hours trading due to volatility.
• Market Orders: Rarely recommended because price execution is uncertain.

Best Practices for Trading

• Use Limit Orders: To control the maximum price you’re willing to pay or the minimum price you’re willing to sell for.
• Stay Updated: Constantly monitor news and other market-moving events.

Risks of After Hours Trading

Market Volatility

Prices can be more volatile during after hours trading due to fewer participants and volume.

Lower Liquidity

With fewer participants, it may be harder to execute trades at favorable prices.

Potential for Wider Spreads

Bid-ask spreads can be significantly wider, making trades more expensive.

Conclusion

Recap of Key Points

After hours trading provides more opportunities to trade outside regular hours, but it also comes with increased risks such as lower liquidity, greater volatility, and wider spreads.

Encouragement to Experiment with After Hours Trading

By understanding the risks and following best practices, you can effectively make use of after hours trading to gain a competitive edge.

Closing Remarks

While after hours trading is not for everyone, it offers a unique opportunity to react to market events and potentially find new investing opportunities.

FAQs

What time does After Hours Trading start and end?

After hours trading generally starts at 4:00 PM ET and ends at 8:00 PM ET.

Can I place limit orders during After Hours?

Yes, limit orders are highly recommended during after hours trading.

Is After Hours Trading available on all E*TRADE accounts?

Not all account types may support after hours trading. Check your account settings to confirm.

What should I consider before trading after hours?

Consider the potential for increased volatility, lower liquidity, and wider spreads before engaging in after hours trading.