Mastering After-Hours Trades: Navigating Volume Spikes! | Podcast Episode #351

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.

0:25
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. In today’s episode, we are going to talk about those volume bars that you see that can be really dramatic and really huge in the after hours trading.

0:41
Sometimes you’ll see it in the premarket hours. Should you be concerned with that? Should you trade off of those? Should that make you want to be more engaged than after hours trade? And we’re going to talk about all that in this particular podcast episode. First, make sure that you’ve liked and subscribed if you’re watching on YouTube. If you’re listening to me on one of the major podcast platforms, make sure to leave a review.

1:00
Five stars would be great. And for today’s e-mail, we’re gonna give the guy a good Florida Reddit name, as I always do, of Dudley and Dudley, writes Ryan, Fairly new listener here. We’ve interacted a couple of times on Twitter, but I have a question that I think may be unique and could possibly be a good podcast.

1:15
The question? Regards trading on this past Friday, June 23rd, 2023, we’re a little bit past June 23rd, but nonetheless we’ll still address the issue. Several stocks saw huge volume spikes after hours. I’ve seen this in the past as well and I can’t seem to find any information regarding these spikes.

1:31
I suspect options are in place somehow, but I can’t seem to find where any monthly options expired this past Friday. Is this something that you can elaborate on? Sincerely, Dudley Dudley? Good question. And one of the things I’ll say about after hours trading and premarket trading, a lot of people get into it.

1:48
A lot of people have a lot of emotions when it comes to especially premarket trading. Premarket trading I would say is highly emotional and highly panic driven. Often times especially when there’s a big move in the premarket, you oftentimes see a move in the pre market that is extremely exaggerated to the downside.

2:05
And then during regular trading hours you will see that move start to recorrect itself and start to move higher throughout the course of the day. And people are like why did I get out right there before the market even open. If I would have just waited till the market open during regular trading hours, I probably wouldn’t have sold that position.

2:22
But they did because there was so much panic in there. And remember, even in the best of situations, the premarket isn’t great for liquidity. In some cases if it’s an earnings report, there’s plenty of liquidity, but by and large, regular trading hours has your best liquidity levels.

2:37
So if you’re doing it in the premarket, especially if it’s like a downgrade and there’s not a lot of volume to it, you’re risking a lot of make sure you’re checking the bid and ask price. And that’s one of the things I would say if you’re going to take a premarket move or an after hours move serious, you need to be looking at the bid and ask price.

2:53
Is there a large spread while there’s probably not a significant meaning behind that move because if it’s based on something real that the stock’s moving because maybe there was an upgrade and after hours trade usually see those in the premarket. But let’s say there was like a major news event or something else, then you’re going to want to see that the bid in the ask price is pretty close.

3:13
If you’re seeing a stock that closes at $100 a share and it’s trading at $110 a share and the after hours but you see the bid price at 99 and you’re seeing the ask price at 111. That’s a pretty big spread. I mean that’s that’s a little bit of an exaggeration, but it’s still it’s a very big spread and that would tell you okay some goofball probably sold 5 shares at the high end of that crazy bid ask and it’s exaggerating the actual move in the post market trading.

3:40
So I wouldn’t take those moves too serious, but if you see a stock that closed the day at 100 and it’s now trading at 110 and you see a bid ask of like 100 and 998 and an ask of 110 O one, yeah, there might be something serious there And you’re seeing the volume continue trickle in and it’s moving up and down.

3:59
Yeah, there’s some activity there. You’re seeing that there’s actually a lot of traders. But sometimes these moves there’s like one trader that did it and it might have been just like a fat finger flush, maybe it was only like a couple shares, but it was enough to actually register in the after hours and and cause a a spike that wasn’t really meaningful and won’t be there when the market opens the next day.

4:17
Another one that I really don’t take very serious is after hours trading on Friday afternoons. I think, especially with the indices, could care less. That doesn’t mean that there can’t be some meeting behind them, but by and large it doesn’t even register come Sunday night when the futures open up again.

4:48
It’s going to probably recorrect itself when the futures open up Sunday night or quickly recorrect itself thereafter. So after hours trading Friday afternoon, it doesn’t really mean too much. Even even if it’s options expiration, I don’t care about it. By and large, I don’t care about after hours or premarket trading.

5:04
I don’t think there’s a lot of reason to trade it. Even in this might surprise some of you. There’s times where I’ll buy a stock at $100 a share and then it gets down towards my stop loss and it gaps down below it the next day. So let’s say my stop loss is at $96 a share and it closed at $97.00 a share, but there was a downgrade.

5:25
Now it’s trading at $95 a share. So I’m going to lose about another percent or so on it. A lot of people will say, Oh my gosh, I got to get out of it. I’m going to get out of it down the premarket. I still wait for for the regular market to start trading. Why? Because again, there’s a lot of panic in the premarket. Doesn’t mean that it can’t get worse.

5:41
But that’s just one of my rules. I that’s one of my rules of trading. I don’t trade the premarket, I don’t trade the after hours, I trade regular trading. Then you’re starting to expand your parameters for what you will and what you won’t do and then you’re taking on a whole lot of emotions. Premarket trading, like I said, very emotional driven, very unreliable post market trading, same exact thing.

6:01
So then I’m going to start branching out into those areas where the emotions are far greater and the price action is less reliable and I’m going to expect myself to be more disciplined in the process, no. So I don’t do it at all. So I’ll wait for the market to open and once it opens I start putting my orders in.

6:17
I’ll say this too that I noticed a lot of times even the stock is going to keep going down at the at the market open a lot of times. And I’ve been able to save, you know, 1 or 2% on a trade at times. Is that if it gets a little bit of a pop right at the open where people are waiting till the opening bell to cover their short positions or go ahead and start buying some on the dip and you’ll get this momentary blip of where it’ll jump up like a percent or two.

6:41
And you can actually Curb Your losses some, but you got to be this one. You can’t get into the ideas like, oh, the bottom’s in, everybody’s just going to buy it thereafter. That could be the case. But more times than not, it’s just a quick blip that’ll last for maybe 30 seconds to a couple minutes and then it comes right back down again.

6:56
So if I’m going to be stopped out at the open, whether it’s because of gap down or it’s right on my stop loss, I take a little bit of a time to put my stop loss in. I’ll wait like 30 seconds to a minute to couple minutes before I actually put that stop loss in. And usually I can say face now that there’s a little bit of a looseness when you’re doing that you you do risk, you know, seeing a flush to the downside, but that could happen too before you can even get your order in right at the open as well.

7:22
One thing that I will say that is not highly emotionally charged is swingtradingthestockmarket.com. That is the swing trading website that goes along with this podcast. Man, check it out. You’re going to get all my stock market research each and every day, multiple videos sent to you each and every day.

7:37
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7:54
I think I started this podcast or 2018. I don’t know, but it was a while ago and I think when I first started it was like 9 or 10 people listening to me and now I think much over like 4 or 5 million downloads, which is kind of cool. So it’s been quite the journey. So when can the news actually be valid news?

8:10
Well, we’re in the middle of earnings season right now. And what have we seen? We’ve seen Apple report, we’ve seen Microsoft report, we’ve seen all the big tech stocks report. For the most part, NVIDIA hasn’t reported yet. But one of the common traits there’s, yeah, there’s a lot of trading that goes on when those earnings reports come out. And it’s not just big tech stocks that can be Caterpillar, it can be a lot of your major companies that a lot of you guys know of.

8:29
Even small companies can have a lot of liquidity when their earnings report comes out. Should you trade it? Not me. I I ain’t going to trade it. Even though their earnings is out and I’m not necessarily holding a stock to earnings, You’re starting to trade that reaction to the earnings and that is extremely, extremely unpredictable.

8:45
I have seen so many stocks that just absolutely got hammered initially. And then if you’re thinking of yourself, this thing’s going down bad and I’m going to short it, then all of a sudden 2 seconds later it’s ripping, it’s ripping, it’s to the moon, circling Mars, whatever the the Wall Street best crowd likes to say it’s doing all of that.

9:02
I mean, it’s just going nuts. And so then all of a sudden you’re getting short squeezed 2 seconds after you get in. Or you might buy it because you think that this train is leaving the station without you and you get in and as soon as you get in it tanks. It’s almost like trying to trade the FOMC statement right when it comes out.

9:23
There’s a lot of fake moves, a lot of false moves, and it’s really not in our best interest to try to be a consistent player. That I like the FOMC statement, I let that stuff settle down before I want to get long or short on a stock trade. So earnings, yes, premarket, plenty of liquidity. Would I go ahead and trade that? No.

9:44
No, because the emotions are like an OverDrive and that is just not something that we as traders, we can really manage the risk well and you end up taking a lot of unnecessary losses. And it doesn’t just have to be earnings, it can be news events. Maybe the stock had a significant news release that came out after the bell.

10:00
Maybe it was a disappointing news piece where they lost a contract or maybe they won a contract and they were waiting for whatever reason to wait until after the bell to announce it. That happens quite a bit or it happens in the pre market. They’ll announce it before the market opens and you get the big pre market run.

10:19
So I trade those. No because a lot of times again you’re getting people who are just knee jerk reacting to the news piece and then when the regular trading starts to come in you see a lot of people start taking profits on the move and they’re not going to hold up very well.

10:34
NVIDIA is dropping today as a result of it 5%, so it can be competitor news that’s driving the stock lower in the after hours. It can be economic numbers that impact the energy stocks, like let’s say the Saudis cut production. That’s gonna hit a lot of oil companies in the after hours if it’s announced before or after the market’s closed.

10:53
And while these are important news events, they’re not necessarily things that I want to be trading in the after hours trading. Sometimes I won’t even trade it during the regular trading hours. I want to let that price settle down some, see where if it’s causing a significant sell off, I want to see where that price is going to settle in at start to build a support base or what kind of trendline or support level that it might bounce off of.

11:12
So I might give it a few days. I don’t have to react right away. And a lot of people we see the news and and that we think that it requires a reaction from us and it doesn’t just watch it just watches trade less try to find better reward risk setups even if that upsets you in the long run because you you see some of the stocks that you could have been in and you missed out on.

11:30
We like to think about those a lot but we we soon forget about the stocks that we would have been in and lost big on and we don’t really think about that we’re we don’t like congratulate ourselves for sometimes avoiding some of these big losses. So in summary I don’t trade the premarket. I don’t trade the after markets.

11:47
I think I’ve pretty much made that clear. I give you some tips on what to do when the stock drops below your stop loss in in the premarket and what what to do when it opens up and whether I would even take a loss in the premarket when it’s trading below my stop loss. I don’t. It’s important to remember to look at the bid ask spread.

12:03
What kind of spread are you dealing with? Are you talking about like if there’s like a four or 5% spread on a four or 5% move in the after hours, probably not a big deal. Even if there’s a lot of volume that could just that could be for a unknown amount of reason and that’s the only trade that’s going to happen. It might be one person dumping a ton of shares and that’s it.

12:20
Next day it goes right back to normal. It moves on Fridays. Don’t really care about them. I don’t think they really mean too much even in the indices or in the futures. After the market closes and they keep going up or they keep going down. Often times that gets self corrected at the open come Sunday night or or Monday morning.

12:37
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12:54
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13:10
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13:31
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