What You Need to Know About Open Market Orders and After-Hours Trading

Learn about open market orders & after-hours trading: what they are & how they work & their potential risks & benefits.

What You Need to Know About Open Market Orders and After-Hours Trading

An open market order (MOO) is an order that is executed at the opening price of the day.

Market-On-Open

(MOO) orders can only be executed when the market opens. These orders must include the first printed price of the day and can only be placed during market hours. A market order placed when the markets are closed will be executed at the next market opening, which could be significantly higher or lower since its previous close.

Investors send open market orders when they want them to be executed at the opening price and be part of the morning auction. An investor can use this order if they want to capture the price of a stock, go up or down as soon as the trading day begins. Orders that meet the requirements for the opening auction cannot be canceled one minute before the opening session until the opening auction ends. In addition to normal trading hours, investors can also trade stocks during after-hours and pre-market operations.

After-hours trading takes place in the hours after the stock market closes, while pre-market operations take place in the hours before it opens. Depending on the foreign exchange market, there may be different rules for trading outside business hours than for normal business hours. Most brokerage firms require customers to accept the Electronic Communication Network (ECN) user agreement before performing operations after business hours. ECN electronically pairs buyers and sellers to execute limited orders.

Sometimes, after-hours orders are placed through a dealer at a better price than the best ECN deal. At the end of extended hours, all incomplete orders are canceled. Some brokerage accounts that offer after-hours trading include Merrill Edge, Fidelity, and Charles Schwab. For starters, you can trade anytime with after-hours trading. In other words, you can trade when it's most convenient for you or in response to timely news.

There is no guarantee that your order will be processed after business hours, even if you place the order. The vast majority of transactions are carried out during normal business hours. That means that if you're selling stocks, there's more demand during normal trading hours. If you are buying stocks, there is more supply during normal trading hours. In addition, price volatility tends to be higher during after-hours trading and your broker may impose trading limitations. However, one of the main potential drawbacks is that buying and selling outside normal business hours could adversely affect your profitability.

For example, if you're trying to sell stocks for an extended hour, there might not be as many buyers interested in those stocks. In this case, you may not be able to get the price you want. Stock market hours may vary around the world, but trading after hours offers you a great opportunity to make trades right away and minimize risk. It may be wise to consider a limited order if you need to place an order right away, but it doesn't matter what time of day the trade takes place. A limited order will allow you to choose the price at which you are comfortable buying or selling, without time being an issue. It can be completed any time the price you selected is available. There are many different stock markets to choose from so if you decide that after-hours trading isn't for you, consider a stock market with different hours.

You can also simply wait to trade during normal business hours. Do you have any questions? Ask our investment expert - an author, professor and 26% investment expert with almost two decades of experience as an investment portfolio manager and chief financial officer of a real estate holding company. This could also be the case in fast-moving markets, when stock prices can change significantly in a short period of time. A buy stop order is placed at a stop price above the current market price (in essence, it prevents stocks from escaping you as they rise). Limited orders placed while all sessions are closed are queued up for the opening of the next regular market session or the next extended hours session, depending on your selection. Orders placed outside market hours and transactions during extended hours are queued up for the start of the next regular market session according to your instructions. The final stop orders you place during extended hours will be ready for the opening of normal market hours on the next trading day.

The stop limit and stop loss orders you place during extended hours will also be ready for the opening of normal market hours on the next trading day. Daily Limit (GFD) orders placed with execution instructions during normal market hours will expire at the close of normal market hours on that day. NYSE Arca Names Top Market Makers (LMMs) for ETPs (Exchange-Traded Products) with a Main Stock Exchange Listing to Meet Defined Obligations in Exchange for Incentives such as Lower Transaction Fees. Most investors will probably want to avoid trying to enter and exit the market in the short term and follow a long-term plan. As a result, you may receive a lower price when trading with extended hours than during normal market hours. Some investors may find that after-hours trading offers them more flexibility and convenience than traditional stock markets do. However, it's important to understand all of its potential risks before engaging in this type of activity.

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