Trading After Hours | Podcast Episode #143

0:07
Hey, I’m Ryan Mallory and this is my Swing Trading the Stock Market podcast. I’m here to teach you how to trade in a complex ever-changing, world of Finance, learn what it means to trade, profitably and consistently managing risk, avoiding the pitfalls of trading. And most importantly, to let those winners run wild, you can succeed at the stock market and I’m ready to show you how, hey, everybody, this is Ryan Mallory with Swing Trading the Stock Market and And have a good episode today on after hours trading, what does it entail?

0:41
Is it something that you should incorporate into your trading strategy? Well, I have a listener here that has sent me in an email about after-hours trading. I’m going to read it and then we’re going to address it and there’s a lot to this. Now, I’ll say, right off the bat, I’m not a big fan of after-hours trading, but does it mean that we can’t discuss it, the pros, the cons and all that good stuff and we’ll get right into it here.

1:02
And the name I’m given this guy is Cephas. Now, here in Florida Will Call some people named Bocephus just cephas but for the purposes of this episode, a combo cephas. All right? And Bocephus says, hey Ryan, my name is Bocephus.

1:19
I am a fan of your podcast, really enjoy the short pods that are straight to the point of Topic at hand. That’s my goal. He says, I’ve been investing in stocks for a while now and have a pretty solid portfolio and actually enjoy doing fundamental analysis on stocks and companies it can be extremely time consuming.

1:35
Zooming. But generally I’m not too worried about entering a position after hours. I got to tell you there’s one thing I don’t enjoy doing and that’s fundamental analysis I just don’t enjoy it. I think I think a lot of times for people who are really into crunching the numbers of companies and going through the balance sheets and the financial statements as a whole that can be really rewarding for me.

1:56
I don’t feel like that. I’m going to find much of an edge in the balance sheets because there’s so many people on Wall Street that are already looking at those financial statements that if there’s Jim to be uncovered. It’s already been uncovered, any case he goes on and, and look, I am not saying that that’s absolutely true.

2:12
In every case, I’m just saying in general, that’s kind of how I feel about it. He goes on to say, he says, I’ve always been interested in swing trading but my technical analysis. Knowledge is very limited. I’m working on it. He says I’ve dabbled in a few trades here and there with reasonable success but due to my career in construction management, I have next to no free time during the market hours to check charts and track my trades and watch list.

2:33
Anyways I guess. A long-winded question. I’m trying to ask is, what are your thoughts on trading out of Market hours or other strategies that I can employ other than the long-term investing that I’m currently doing? I appreciate any feedback you might have on this topic and keep up the awesome podcast and whiskey reviews.

2:53
All right, since he mentions whiskey reviews, I’m drinking a whiskey is kind of a plain Jane one, you know, it’s but it’s a Dependable one. I don’t think it’s a bad one. I don’t think it’s the best one. That’s larceny. 792 proof that makes it 46 percent alcohol.

3:10
Now, when you drink it, it’s along the lines of Four Roses. Elijah, Craig may be up there with Buffalo Trace but not quite up there with Buffalo Trace. It has a little bit of the heat index that Buffalo Trace presents. So on the grand scale, I give it like a 6-3.

3:25
Now my brother loves this stuff. He drinks it all the time, he thinks it’s pretty good. He’ll tell you, it’s just a great all-around bourbon in it. It’s not bad at all. I might have to go it out and get A bigger bottle. Just so that I have one around. When people come to visit any case. Roger, Craig, give it about a 6-3, not bad at all.

3:42
I mean it’s falling up a pretty tough act with Blanton’s, from the previous episode, Blanton’s was amazing that was like a 97. Let’s get on to the skies email here, right? So it’s important to note that there’s more risk when you’re trading after hours. And there’s a lot of reasons for why after hours trading is risky.

3:59
And again, I said this already in the episode. I’m not a huge fan of trading after hours. I feel like a lot. Times when you’re trading in the pre-market, or after the market closes, you’re susceptible to a lot more emotions because that’s usually the reason why you’re trading in after hours, not in this particular situation when Bocephus.

4:17
But, in general, a lot of times why we trade after hours? It’s because it’s be emotionally driven, it’s out of the context of normal trading hours when there’s a lot more liquidity. And so, for me, personally, I dislike it very rarely, will I trade and after hours, in fact, and all the years that I’ve been doing the trading block, I think I’ve made one trade and the pre-market and never done one in the after hours.

4:42
Doesn’t mean I haven’t done them before in my past. I’m just saying though. It’s like 4:00 in the trading block. I’ve only done one. It was in the pre-market and I really regretted it. I would have been much better if I just waited till the open. Like I did with all my other trades because a lot of times, the that premarket action is very emotionally driven and it’s the same in the after hours to, I would probably say more in the pre-market.

5:02
Smooshing. We driven than the after hours. But there’s an earnings. Ford or whatnot. It’s going to be emotionally driven. There’s gonna be a lot of hype falling behind it. And a lot of people are piling in the after hours because they’re wanting to get in on that move. And a lot of times they get stuck in a bad position and they become ultimate bag holders for those who don’t know what a bag holder is and stocks.

5:22
A bag. Holder is a person who gets into a stock at probably the absolute worst price or pretty close to it. And they become the person who’s holding that stock until it keeps creeping closer and closer and closer to 0. You have an That’s right. Now going on with like, GameStop where the stock is gone from like ten dollars.

5:40
A share just about a month ago, all the way over a hundred and fifty dollars. A share of all those people who bought they’re probably going to be bag holders. Ultimately, I mean especially if if you bought in that like 100 110 120 dollars or even higher than that. But here’s the thing of though and I’m telling you guys, this is much, as I’m telling Bocephus this is that after-hours trading is very illiquid.

6:01
There has to be a reason to trade after hours. And when I say that, that Means that it needs to have like a news event needs to have some earnings going on. Because for the most part, when the market closes, the price activity in stocks goes to almost nothing. Now Apple a little bit more liquid Tesla is going to be a little bit more liquid but you’re going to still probably see a bigger spread with the bid and the ask.

6:24
And so the problem with that is that means that your Phil is not going to be very good when the bid and the ask has a very widespread during Market hours on a hundred dollar stock. You may only have like a two or a three. Sent spread on a very liquid stock. And the after hours you may be seeing like 50 or 60 cents on a hundred dollar stock.

6:41
So then you’re starting to talk about a much bigger spread to get long at or to sell out on a position. And here’s the other thing about after hours to is that you can’t just do a market order, you can’t do a stop order. You can’t use stop losses. Everything is limit orders and after-hours trading, which also makes it very hard, both getting in and getting out becomes very tricky and your films are not going to be Nearly as good.

7:06
Now it’s a little bit different when there’s an earnings report because your bid in your ask price is going to be much, much tighter like a Facebook’s reporting earnings, like it does. Later this particular week that I’m doing this episode, yeah, there’s going to be a much tighter spread in the bid and the ask price. So it’ll be easier to get an out, but that’s going to be because there’s so much volume pouring in because of that earnings report.

7:27
But think about it for Facebook. That’s only four times a year for any stock gets only four times a year. Now, if there’s a major news event that happens before after, yeah, there will be or Price activity even if there’s an upgrade on the stock. Yeah, there’ll be more activity. That will be it’ll be moving more towards a gap higher.

7:42
If there’s an upgrade or lower, if there’s a downgrade but even then it’s not going to be nearly the amount of volume that you’re going to see from like earnings report or if it’s a biotech stock like FDA report. So these events for each individual stock doesn’t happen all the time and if there’s like a buyout it’s just going to shoot right up to that buyout price.

8:01
For the most part in, give you very limited reward for whatever risk that you’re taking on and hey, Me tell you guys to about this podcast, swing trading the stock market its Patron account because it’s a great opportunity to stay abreast of all of my latest watch lists. I update the multiple times each week, you’re going to get daily trade setups.

8:19
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8:35
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8:51
So Bocephus here, he’s got a kind of an issue with what he’s doing for a living. He’s a construction worker and those guys, they don’t work at night. They work during the day, right? And during the day, that’s when the markets open, if he’s in the east coast, it’s And we going to be wiped out by his work schedule.

9:08
So, how does he really do that? Well, there was a time when I was swing trading that I had no access to the stock market really during the day, I’d either be traveling or I would be working for the man when I was in Corporate America. And I didn’t really have a way. So, one of the things that I did, I know, thinkorswim has this and I haven’t used it in a long time, because I don’t really need it, but there’s plenty of brokerages that actually do this, but you can actually set an order to be placed after Er, a certain time.

9:36
So you can say, after the first 30 minutes of trading. So, you know, if you’re on the East Coast, you’ll say after 10:00 10:00 a.m. eastern time. And so I feel like a lot of times Traders as a whole, can make very good trading Decisions by not being caught up in the moment of when the stock market’s actually trading by cleaning out their trades at night.

9:52
It works a lot better for me that way too. And in that sense you can swing trade by basically planning out your trades. It’s like okay after the first 30 minutes, I want to get into this trade, at this particular price. Now, that doesn’t mean that every time Going to fill it may be way above the price that you wanted to get into and you have like a limit order or you have a stop order.

10:11
But you can also do like stop limit orders that you can submit, which gives it a range of where you’re willing to buy it and between. So check that out. Because I think that, you know, if you’re a working person and you can’t necessarily Place those trades during the trading session, if you plan out your trades, the night before you can actually stay.

10:28
Hey, this is when I want to place the trade, this is how I want to do it and it could work for you now. It’s not going to be as ideal as being, right? Right there in front of the computer and doing it. But, look, look, if you’re a part-time Trader, everybody has different part-time trading circumstances, just like Bocephus has a different one that maybe somebody that’s working from home all day and they can have another monitor in their boss isn’t going to be able to see what they’re doing and they can be watching the stock market all day or have their TV on, right?

10:52
So there’s different circumstances that surround each person’s job activities and in this person’s case and I’m sure there’s plenty of listeners here that have the same problem is that you need to really explore the tools that your brokerage firm. Offers I know I’ve used it on thinkorswim in the past is like hey place this trade at this particular time and they were able to do that.

11:11
And I think there’s some Purity to that too because you’re able to come up with these really good trade setups not because you see gme trading up 50% or 60% but you’re looking at the chart the night before understand. Okay. This stock is actually setting up provides a good reward to risk opportunity.

11:26
You’re not caught up in all the emotion and all the hype and you’re able to make logical reasonable deductions on your portfolio and the opportunities. At the markets providing and you can take advantage of them accordingly. But you got to remember too. If you’re going to trade after hours, you got to expect extreme volatility.

11:42
Earnings is the best example, I mean, you all the time, we’ll see a stock report earnings and it will go from like, 100 up to $110 like right out of the gate. Everybody think they beat earnings? It’s great, it’s great, it’s great, and they stay there, the rest of the time, maybe they creep up to 115 dollars and then they wake up in the morning and the stock is trading at, like $80 a share.

12:02
I’m giving a little bit of an extreme example, right? You get the point though. It’s you wake me. You go to bed at night thinking, okay? It’s going to be a good day in the market. The stock beat its earnings. It traded higher afterwards. There was a good conference call or maybe the conference calls in the morning when they do the conference call, they say some stuff that the market clearly doesn’t like.

12:19
And now it’s going from, like, $115 chair down to like 80 or 90 dollars a share, and it had closed the previous day at 100. So you’re now down like 10% instead of being up 15%. And that just happens, and that’s why it’s very difficult to just trade earnings reports. Now, when it comes to earnings, I I usually like to wait, like a couple days before I will consider trading that stock.

12:39
Sometimes that’s not always the case, but if it seen a big sell-off, I want to see it settle in for about two to three days. Before I take a step to the long side. But the differences are not just in after hours versus the pre-market, you’ll see all the time, where the stock will pop, and then it will drop.

12:56
And I tell you what, I see, so many Traders, give infuriated by this like, oh, they had good earnings. Oh, they did amazing. And tell had good earnings, this past quarter and they sold off. I mean, that’s, that’s why I say don’t play the earnings, don’t play the earnings because even if you say, hey, they’re going to be estimates.

13:12
It doesn’t necessarily mean that they’re going to do good, Intel beat earnings and they actually rallied in the after hours and then they sold off. And the pre-market, the next day, just wasn’t a very good and sometimes that has to do with how the markets responding. The next day, it might rally 56 percent after hours on their earnings and then the Market opens down 2%.

13:29
Yeah, it’s probably going to drag that one down to in essence, when you’re trading after hours, it’s very difficult, coupled. With the restrictions on the order types, coupled with how ill liquid. It is to find Reliable moves and after-hours trading for me. It’s better to stick with trading hours. That’s what I do and that’s that’s why I hope I convey to Bocephus here is, is that look You can, you can still trade during the hours.

13:50
You might not be around the computer, but you can still set up orders to take advantage of the market conditions as if you are there, you can do variables. If and then, I mean, there’s platforms all over the place that do that. You just got to dig into it. And if it’s not even a platform, it can be a software that you can go to. Whether I don’t have a ton of experience on it or else I would tell you about it.

14:09
But but I do know that there’s a lot of platforms out there that give you the ability to set the terms of your trade. And look I mean there’s more liquidity after-hours right when the market closes then there is towards like 7:00 or 8:00 at night at that point in time.

14:24
It’s going to get far less liquid. There’s just not going to be as many people trading. And so if your time to really, trade after hours is very limited and it’s so much more emotional. And so, I always think that it’s a good thing to stay out of the emotions of the trade as much as possible.

14:40
And when you start getting into after hours own, and your reasoning for trading after hours, it’s usually emotionally based, maybe it’s because your stock Got downgraded your down, 10% in the pre-market and you’re scared to. Wait. Let’s say it’s like a couple of hours still before the Market opens and you’re scared to wait until the Market opens two hours later because you’re afraid that it might be 20 percent and maybe it will be, but oftentimes, when that, when that happens and and and I sell in the pre-market, I’m usually regretting it.

15:04
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15:24
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15:44
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16:03
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16:21
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