The previous Active Trading blog examined risks and preparation for extended hours trading. Now, a strategy for pre-market and after-hours trading is examined.
Extended hours trading can be potentially profitable, in part because high frequency traders are not active. However, traders need to be aware that this lack of volume, along with less activity from human traders, significantly elevates risk.
One of the biggest challenges with utilizing this strategy is finding another stock symbol to serve a trading partner. To overcome this, traders should look for securities that typically have a tight bid ask spread in extended hours trading (often more stable companies or ones that see high volume), or stocks resting on key technical levels.
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