Market Hours and Sessions
Learn when the stock market is open, why timing matters, and how overnight news can cause dramatic price gaps.
Learning Objectives
- Know the regular trading hours for U.S. stock markets
- Understand pre-market and after-hours trading sessions
- Learn how trade settlement works (T+1)
- Recognize why price gaps occur and how to handle them
Market Hours and Sessions#
You check your portfolio at 9:00 AM and see a stock you own is up 5%. Great news! But when the market officially opens at 9:30, it jumps another 8%. What happened?
Understanding market hours isn't just about knowing when to trade—it's about understanding why prices can change dramatically between trading sessions and how overnight news creates opportunities and risks.
The Key Insight: The stock market closes every night, but the world keeps turning. News happens 24/7, and when the market reopens, prices often "gap" to reflect everything that happened while it was closed.
Regular Trading Hours#
U.S. stock exchanges (NYSE and NASDAQ) operate during set hours:
| Session | Time (Eastern) | Time (Pacific) |
|---|---|---|
| Market Open | 9:30 AM | 6:30 AM |
| Market Close | 4:00 PM | 1:00 PM |
| Duration | 6.5 hours | 6.5 hours |
Days of Operation:
- Monday through Friday
- Closed weekends and major U.S. holidays
- Some early closes (1:00 PM ET) before certain holidays
Why Timing Creates Price Gaps#
The Overnight News Problem#
Companies don't announce news on the market's schedule. Earnings reports, FDA decisions, and geopolitical events happen around the clock. When markets reopen, prices adjust all at once.
Real-World Example: The Earnings Gap
Imagine you own shares of TechCorp trading at $100 at Friday's close:
| Time | Event | What Happens |
|---|---|---|
| Friday 4:00 PM | Market closes | Stock at $100 |
| Friday 4:15 PM | TechCorp reports strong earnings | News released |
| Friday 4:30 PM | After-hours price jumps | Stock trades at $110 in thin after-hours market |
| Monday 9:30 AM | Market opens | Stock "gaps up" to $112 as full market reacts |
You didn't miss anything—your shares simply became worth more overnight. The gap happens because buy and sell orders accumulated while the market was closed.
Gap Up vs. Gap Down#
| Type | What Happened | Example |
|---|---|---|
| Gap Up | Price opens higher than previous close | Good earnings, positive FDA decision |
| Gap Down | Price opens lower than previous close | Missed earnings, CEO resignation, lawsuit |
The Size of Gaps Can Be Dramatic:
| Scenario | Typical Gap Size |
|---|---|
| Minor news | 1-3% |
| Earnings beat/miss | 5-15% |
| Major positive surprise | 15-30%+ |
| Company disaster | 20-50%+ |
Overnight Risk Is Real
If you own a stock when the market closes, you're exposed to overnight risk. A company could announce terrible news at 5 PM, and you can't sell until 9:30 AM the next day—by which time the stock might open 30% lower.
Extended Trading Sessions#
Pre-Market Trading (4:00 AM - 9:30 AM ET)#
Pre-market trading lets you react to overnight news before the main session:
| Pre-Market Details | |
|---|---|
| Hours | 4:00 AM - 9:30 AM ET |
| Most Active | 8:00 AM - 9:30 AM ET |
| Why It Exists | React to overnight earnings, news events |
Practical Example: A pharmaceutical company announces at 7:00 AM that the FDA approved its new drug. Pre-market trading lets investors buy (or sell, if already holding) before the 9:30 open.
After-Hours Trading (4:00 PM - 8:00 PM ET)#
After-hours trading is where earnings reactions first appear:
| After-Hours Details | |
|---|---|
| Hours | 4:00 PM - 8:00 PM ET |
| Most Active | 4:00 PM - 6:00 PM ET |
| Why It Exists | React to earnings released after close |
The Earnings Release Pattern:
- Most companies report earnings after 4:00 PM close (to avoid disrupting regular trading)
- After-hours traders react first
- The real price discovery happens at next day's open
The Hidden Costs of Extended Trading#
Extended hours trading seems convenient, but it carries significant risks:
1. Wider Spreads = Higher Costs#
| Session | Typical Spread (Large Stock) | Example |
|---|---|---|
| Regular hours | $0.01-0.02 | Buy at $100.01, sell at $100.00 |
| Extended hours | $0.10-0.50 | Buy at $100.25, sell at $99.75 |
In this example, trading after hours costs you $0.50 per share more than waiting for regular hours.
2. Lower Liquidity = Price Impact#
During regular hours, a 1,000-share order executes at your quoted price. During extended hours, the same order might move the price against you because fewer shares are available.
3. Misleading Prices#
That after-hours price jump might not stick. With low volume, a few eager buyers can push prices temporarily before the market opens and the full crowd arrives.
When Extended Hours Make Sense
- You MUST react to specific news that will move price significantly
- Your position is small relative to available liquidity
- You use limit orders to control your price
For most long-term investors, waiting for regular hours is better.
How Trade Settlement Works#
When you buy shares, the exchange of money for stock isn't instant. This is called settlement.
T+1 Settlement (Current Standard)#
| Term | Meaning |
|---|---|
| T | Trade date (when you click "buy") |
| +1 | One business day later |
Example Timeline:
- Monday: You buy 100 shares of Apple at $150
- Tuesday: Settlement—shares officially yours, money officially gone
Why Settlement Matters for You#
| Situation | What Happens |
|---|---|
| Cash account | Can't buy new stock until previous sale settles |
| Selling shares you just bought | Technically okay, but funds won't settle for another day |
| Dividends | You must own shares BEFORE the record date (by settlement) |
Practical Example: You sell Stock A Monday morning to buy Stock B. In a cash account, you can buy Stock B Monday, but if you sell Stock B Tuesday, you might violate settlement rules. Margin accounts avoid this issue.
Settlement Has Gotten Faster#
| Era | Settlement Time |
|---|---|
| Before 2017 | T+3 (3 business days) |
| 2017-2024 | T+2 (2 business days) |
| 2024 onward | T+1 (1 business day) |
The trend toward faster settlement reduces risk in the financial system.
Global Markets: The 24-Hour Cycle#
While U.S. markets sleep, global markets trade:
| Market | Local Hours | U.S. Eastern Time |
|---|---|---|
| Tokyo | 9:00 AM - 3:00 PM JST | 7:00 PM - 1:00 AM |
| London | 8:00 AM - 4:30 PM GMT | 3:00 AM - 11:30 AM |
| Hong Kong | 9:30 AM - 4:00 PM HKT | 9:30 PM - 4:00 AM |
Why This Matters:
- Asian market moves overnight affect U.S. futures
- European trading overlaps with U.S. pre-market
- Major global events (elections, central bank decisions) happen around the clock
Example: China announces surprise tariffs at 8:00 PM Eastern. Asian markets react overnight. European markets open down. By the time U.S. markets open at 9:30 AM, prices have already adjusted.
Practical Strategies for Market Timing#
For Long-Term Investors#
| Strategy | Why It Works |
|---|---|
| Don't watch pre-market prices | They're volatile and often misleading |
| Use limit orders when trading | Avoid getting poor prices during volatile opens |
| Ignore daily gaps | Over years, they average out |
| Focus on fundamentals | Your 10-year return isn't determined by opening prices |
For Active Traders#
| Strategy | Why It Works |
|---|---|
| Watch pre-market on earnings days | Gauge sentiment before open |
| Avoid first 15 minutes | Most volatile, widest spreads |
| Use limit orders in extended hours | Control your price in thin markets |
| Understand gap risk before holding overnight | Position size accordingly |
Key Takeaways
- U.S. markets: 9:30 AM - 4:00 PM Eastern, Monday-Friday
- Price gaps occur when markets reopen after overnight news—common after earnings
- Extended hours (pre-market, after-hours) have lower liquidity, wider spreads, and higher risk
- Trade settlement is T+1—shares and cash officially exchange one business day after trade
- Global markets trade while U.S. sleeps, affecting overnight futures and morning opens
- Long-term investors: Don't obsess over timing; use limit orders and focus on fundamentals
- If trading extended hours: Only when necessary, always use limit orders, expect worse prices