Tips for trading after hours and on weekends

Posted: 26 April 2022 9:15 am
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With earnings season in full swing, after-hours trading gives Aussie investors a chance to capitalise on US market moves as they happen.

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If you're an Australian investor trading US stocks, opportunity doesn't always knock during regular trading hours. That's especially when US earnings season is upon us. As some of the world's largest companies release their results for the previous quarter, market volatility can often increase.

To take maximum advantage of the opportunities this volatility provides, you'll need to be able to trade outside regular trading hours. Keep reading to find out why, and for details on the potential benefits of after-hours and weekend trading.

Why trade after hours?

While stock markets are only open during specific hours, news that impacts stock prices can happen at any time. This is particularly evident at the moment as earning season kicks into gear in the US, when many of the key announcements that drive market movements occur outside regular trading sessions.

Roughly a couple of weeks after the end of each quarter, many publicly listed US companies start releasing their quarterly earnings. As you'd expect, earnings releases can have a huge impact on the market. If a company reports better than expected performance, for example, its stock price could spike. But if figures don't meet pre-release expectations, their announcement can have the opposite effect.

"The benefits of after-hours trading are numerous...it's a great opportunity for speculators to trade on the volatility around earnings releases that come out after Wall Street's closing bell..."

"US earnings season is a major deal for global markets," says IG analyst Hebe Chen. "It's a big driver of sentiment generally that filters through equity markets across the globe. And it's a great snapshot of the fundamental strength of the global economy, with many of the world's largest companies reporting and providing colour on the business environment and the risks and challenges to growth at any one time."

But here's the important part: most companies release their earnings updates outside main trading sessions on US markets. So to take full advantage of the resulting market volatility, you want to be able to trade after hours. Instead of having to wait for the markets to open for full trading, you can act on key announcements as they happen.

"The benefits of after-hours trading are numerous, and depend very much on how you approach the markets," Chen says. "For one, it's a great opportunity for speculators to trade on the volatility around earnings releases that come out after Wall Street's closing bell — many of the US's major tech stocks report at this time, which aligns with the Australian morning, providing local traders great trading opportunities."

"On top of that, it can allow investors to buy or sell stocks based on what an earnings report delivered to the market, and whether that new information changes their fundamental investment case for the investment they held."

Taking advantage of earnings season volatility

Some of the world's biggest companies are announcing their quarterly earnings this April and May. How those results impact the prices of individual stocks, and the performance of the market as a whole, will depend on how earnings compare to analysts' forecasts.

But which companies are announcing their latest results this earning season? Let's take a look at some of the upcoming highlights this April and May.

CompanyEarnings release date (US)Time (AEDT)
Meta Platforms27 AprilPost market
Moderna5 AprilPre market
Microsoft Corp12 AprilPost market
Apple Inc28 AprilPost market
Alphabet Inc26 April2pm Pacific time
Amazon.com Inc29 April12 PMEDT
Alibaba Group Holding Ltd12 MayPre market
Nio5 MayPost market
NVIDIA Corp25 MayPre market

As you can see, earnings reports are commonly released outside regular market hours. If you have an online broker that offers after-hours trading, you can make trading decisions based on these announcements as they happen and potentially benefit from the volatility they cause.

However, not all online trading platforms offer after-hours access, so you can only trade US stocks from 11:30pm to 6am AEST. One online broker that does offer after-hours trading is IG. With an IG trading account, you can take advantage of access to after-hours share and CFD trading of over 70 major US stocks, including brands like Facebook, Apple, Amazon and Tesla.

This means you can trade select US shares from 9pm to 7:30am AEST Monday to Thursday, and 9pm Friday to 7am AEST Saturday. CFD trading of these US shares is accessible from 6pm to 10am AEST Monday to Thursday, and 6pm Friday to 7am Saturday AEST.

"Many investors don't like the volatility that can come from company results, so may use a CFD product with us to short the stock, for example, in the event that the company disappoints the market and it results in some downside in a share's price," Chen says. "After-hours trading makes it easier to enter or exit these trades. It also provides the flexibility to read the market's reaction to an earnings release without having to stress about the big swings in prices that can occur following them."

Benefits of weekend trading

Another way to take full advantage of breaking news is to choose an online broker that offers weekend trading. If your broker offers Saturday and Sunday trading, you can act on key news and unexpected developments as they occur, rather than having to wait until markets open on Monday morning to trade.

For example, let's say you're just about to head to bed late on a Friday night when you see some breaking news that you think will prompt the FTSE 100 to rise. Under normal circumstances you'd have to cool your heels until Monday morning to trade on the regular weekday market, but weekend trading allows you to jump on the opportunity straight away.

You can also use weekend trading to mitigate your losses by hedging against your regular trading. For example, let's say you leave a long weekday position open on a particular market at the close of Friday trading, but an unforeseen weekend event means you expect the market to fall dramatically. By opening a short weekend position on the same market, you can offset some of the losses from your weekday position.

"I think the major benefit of weekend trading is risk management," Chen says. "News that comes out of the weekend can impact markets considerably, but with most of the market closed, it can make for a nervous wait to, say, exit a trade when you know a piece of information has emerged that could result in a loss, or even just a heightened level of risk. Being able to execute a trade over the weekend can mitigate that uncertainty and provide peace of mind."

Of course, you'll need to choose an online broker that offers weekend trading, such as IG. With an IG account you can trade CFDs on Saturdays and Sundays on major stock market indices (FTSE 100, German 30, Wall Street and HS50), forex pairs (GBP/USD, EUR/USD and USD/JPY) and cryptocurrencies (including BTC, ETH and IGs' Crypto 10 Index).

Disclaimer: This information should not be interpreted as an endorsement of futures, stocks, ETFs, CFDs, options or any specific provider, service or offering. It should not be relied upon as investment advice or construed as providing recommendations of any kind. Futures, stocks, ETFs and options trading involves substantial risk of loss and therefore are not appropriate for all investors. Trading CFDs and forex on leverage comes with a higher risk of losing money rapidly. Past performance is not an indication of future results. Consider your own circumstances, and obtain your own advice, before making any trades.

What are the risks?

The good news about trading after hours with IG is that the fees remain the same. That said, there are risks you need to be aware of before trading.

"The biggest risks and costs come from liquidity," Chen says. "Weekend markets are very illiquid and therefore spreads are wider, meaning entering and exiting a trade costs more. Something similar goes for after-hours trading, especially if one trades post earnings when volatility is higher and spreads likely wider."

Different terms and conditions also apply to weekend trading. If you're trading indices or forex on a weekend, you'll notice that prices for weekend trading are quoted separately to weekdays. This allows you to trade based on weekend news without it impacting your regular weekday positions.

It's also important to be aware that stops and limits behave differently on weekends. For example, if you have an existing weekday indices position, any stops or limits can't be triggered on the weekend. But if you keep your weekend position open through until the close of Monday trading, it'll roll over into a weekday position and all stops and limits will still be in place.

That's not the case for crypto markets, however, which don't operate during set market hours, so a position you open on a weekday will continue to move throughout the weekend. The terms and conditions vary based on the market you're trading, so read the fine print closely before opening any position.

Finally, all the usual risks associated with trading also apply. CFD trading is a high-risk investment option with the potential to lose more money than you deposit. And as always, it's vital that you do your own research before deciding where and how to invest your money.

But if you want to better manage risk and take advantage of market news as it happens during earnings season, after-hours and weekend trading are useful tools to have at your disposal. So hopefully when opportunity knocks, you'll be ready to answer.

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