Night Trading — Is That Day Trading In Reverse?

Post by Barbara Cohen

We all know what day trading is. According to Wikipedia, day trading is “the practice of getting and offering fiscal instruments inside of the exact same trading day such that all positions are typically closed before the market close for the trading day.” Well, that makes sense. If you are trading stocks on the New York Stock Exchange, the Market place opens at 9:30am EST and closes at four:00pm EST. So any positions that are each opened and closed within that time are considered a day trade.

But what about night trading? How does that operate? The truth is…it operates very best for the Futures Industry. Most Futures contracts trade nearly about the clock. So a trading day takes on an totally new meaning.

Say you want to trade the S&ampP500 emini. This is one particular of the biggest financial instruments in the world, with upwards of three-four million contracts traded daily. But the occasions that the emini are traded are not 9:30 to 4. The emini really opens at four:30pm EST and continues to trade all around the clock right up until 4:15 pm EST the next day Monday by means of Thursday (it is closed down 4:15 p.m. EST Friday – six:00 p.m. EST Sunday). So that provides a complete new definition to the word “day trader”. There are other Futures Markets as effectively with virtually round the clock trading, so it is feasible to trade at night, no matter where in the planet you live.

For example, say that you want to trade the Euro / Dollar pair in the Futures Industry, the 6a is the contract name. That trades from 6:00pm EST to five:15pm EST Sunday by means of Friday. So no matter exactly where you live, you can trade this instrument. If you live in the USA, and are an early riser, you can start trading at 5:00am EST. By seven:00am EST when you are ready to go to perform, you’re previously performed trading. Or maybe you would like to trade after perform, say seven:00pm EST. Given that the 6a trades round the clock, you will be ready to trade it at that time too. There is lots of action trading this instrument no matter what time you choose to trade.

It used to be that night trading was not a really active. The exchanges, such as the New York Stock Exchange (NYSE) and the NASDAQ, presented what they called extended hours trading for stocks. But there had been so several limitations with stock night trading that no a single took it seriously. One of the primary troubles was lack of liquidity, namely no 1 trading. Liquidity is all about how quick you can convert your stock into money. There need to be active purchasers and sellers in order for you to enter and exit trades quickly. In the world of stocks, from 9:30am to 4:00pm this is a no brainer. There are lots of buyers and sellers for most of the very best traded stocks. But at 4:00pm, individuals buyers and sellers go property, so extended hrs trading for stocks is not quite liquid. You may possibly get caught in a trade for hours.

Another difficulty with extended hours trading of stocks is the spread, the difference in between the bid (what you can acquire stock for) and the ask (what you can sell it for). For the duration of the day, when buyers and sellers abound, the spread is generally really modest, 1-3 cents. But off hours, that spread can be much bigger. And with no liquidity to boot, you may well pay a lot more for the very same stock you could purchase for the duration of the day for less. So the globe of night trading stocks never garnered a lot consideration.

Enter the world of futures trading, with the Chicago Mercantile Exchange (CME), the New York Mercantile Exchange (NYMEX), and Intercontinental Exchange (ICE). With futures contracts trading close to the clock, now evening trading will take on a complete new which means. You will find all the liquidity you want and the spread is no different than during the day. You can trade equities, commodities, crude oil rates, spot gold, and each and every get involved with currency trading.

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