After hours & premarket trading

K

Kicking

Does anybody here trade in afterhours? I never do but I often watch the extended session during earnings season or when the market is heavily oversold(using 1 min.charts +ECN book and T&S + QQQ on ISLD). When there is a significant move it is crazy trading. Like today at 17:15, EBAY went from 62.40 to 64 in one minute,I even saw a print at 67 on ISLD. I didn't know of MSFT news, cause CNBC didn't break the news until 15 min later, but I never trade solely on news anyway . I always tell myself I will try a small lot on a new intraday high for instance but I can only watch frozen in disbelief as the offers jump 1 point or more in less than a minute. The spreads are just insane.Are there programs in AH and premarket, how come all the stocks jump so fast all at the same time? I am always so frustrated I recall the April rally, the bulk of which taking place in AH . I would like to know if anybody succeed in making money from these moves without gambling.

Also is premarket trading similar to after hours? (never trade nor really watch premarket).

Thanks
 
I am a little confused by my first experience trading after hours (other than some select-net trade with a broker a few years ago). I was offering BEAS at 25.54 at the close on IB's best-ecn (well above the close). I was rather surprised when it sold, and decided to check some of the other stocks I watch.

I noticed that KLAC was way up, so I decided to short 10 shares just to see how it worked. As I was loading the trade, a trade went off well above the offer. Since I was shorting, I offered .01 higher on IB best-ecn. Eventually a lower trade went off, so I lowered to be within the spread. I noticed my offer wasn't reflected on IB best or best-ecn, but I thought it was because it was a small odd-lot. Anyway, a trade went off well above my offer, so I cancelled - not wanting to violate the down-tick rule. I re-entered above the last sale on IB Best, and a trade went off above my offer, and then my offer was taken out at 50.39(a violation of the down-tick rule?) Anyway, I covered at 50.00, but noticed that Island often wasn't reflected in my quotes, and many trades happened outside the spread.

So, I guess I'm more confused than you are. Can anyone else shed some light on this? What about illegal shorts when my offer is bypassed?
 
The downtick rule is only applicable during regular session. In pre/post, you can short on a downtick without restriction.

Be aware that the orderly inside market of the regular session does not exist as you know it in pre/post. Trades can execute at any price where two orders happen to match per the rules of the execution route used. No market orders.

In pre/post, volume is a small fraction of regular session, so you will see huge price volatility on news. Correlated stocks move strongly in sympathy. To avoid nasty surprises, use Dow Jones News (broadtape). It's good to have CNBC on (in post especially), but CNBC should not be your primary news source.

In premarket, know your economic reports and times. In postmarket, know who is reporting earnings and who has scheduled announcements. In both pre and post, chart the e-minis. Stay on top of the news in case someone preannounces or surprises as Microsoft did today. If you trade a stock reporting earnings, watch out for trading halts. Also, listen to the conference call and be prepared for price whipsaw.

As in the regular session, always know your support and resistance. S/R operates the same in pre/post as in the regular session.

At slow times without news, pre/post is a chess game. At fast times with news, have a REAL FAST trigger finger. I don't recommend that anyone trade pre/post unless they have studied it for months and understand the behavior. If you don't know the game, it is gambling, or worse, more like strolling through a mine field. Sooner or later you're going to step on one. Good luck.
 
Originally posted by Eldredge
[...]Anyway, a trade went off well above my offer, so I cancelled - not wanting to violate the down-tick rule. I re-entered above the last sale on IB Best, and a trade went off above my offer, and then my offer was taken out at 50.39(a violation of the down-tick rule?) Anyway, I covered at 50.00, but noticed that Island often wasn't reflected in my quotes, and many trades happened outside the spread.[...]
More...

After hours and in the pre-market session the uptick rule is not in effect.
IB's ECN quotes seem to have been changed recently not to show odd lots.
There's lots of people after hours that don't seem to have quotes or access to all ECNs thus causing prints outside the NBBO. This problem seem to be especially common among INCA users and at times provides opportunities to pick them off.

 
I second Lancer's excellent post and have a few observations especially for futures traders.

1) Post- (and pre-) market price surges and plunges occur because those relatively few people who are trading then often want to do the exact same thing ---- buy or sell -----simultaneously, especially on major news, thus creating extreme order imbalances in relatively illiquid markets and issues.

2) Futures traders often have resting stops in the market either to protect themselves from adverse moves against their position or to enter a new position in case of a volatile move in one direction or the other. But the thinly-traded post- and premarkets are especially vulnerable to a mini-version (pun intended) of the very phenomenon IB's president Petterfly addressed in the memo on another thread on this site. This afternoon, the e-mini S&P spiked up nearly 7 points in less than 2 seconds before returning immediately back to its base. This explosion occured on the execution of a great many resting stops, which triggered an outburst that resulted in extremely unfavorable entry and exit prices for hundreds of traders. Interestingly enough, the very same thing occurred earlier in the day at 12:00PM ET when a huge buy program hit the S&P market. E-Mini prices spiked up nearly 13 points before giving 10 of those points back in a matter of seconds. (Even with an exceptionally quick trigger finger, a trader in real time could not react fast enough to do anything one way or the other in both of these situations ---- by the time his order could be executed prices would be nearly back to where the stop-run started.) These stop-activation explosions are not that uncommon in electronically traded markets and give Mr. Petterfly's scenario considerable credibility. The moral of the story: you place resting stops in the market at your own risk!
 
Anyone know if ARCA trades with other ECN's/market makers or only its own book during pre and post market trading hours?
 
I do not use Level II quotes normally, but I noticed, while they were available for free from IB that if I entered a limit bid outside the market, it usually was directed to Island and showec as green on my TWS. However, when I checked on Level II it was ofetn not to be seen. Can anyone explain why this would be? I was entering full lots.
 
A good site i use for pre/post market that shows island,redi,arca orders is
http://www.3dstockcharts.com/
It used to be free but they've started charging now but only $10 a month i think it is.
Watch out for mr arca when he starts throwing large orders on either side
 
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