A stock exchange, better known as the stock market, is a place, physical or digital, where many types of investors trade shares of a public company. If you have been trading in the U.S. financial market, you must know by now that the market only works for a fixed period of time, from 9:30 am to 4:00 pm EST, from Monday to Friday, but, why does the stock market close? Let’s dig in!
Although many stocks are traded online, it can seem strange that the stock market closes.
Cryptocurrency traders are often able to trade at any time throughout the day without any disruption. With cryptocurrency trading, anyone can trade regardless of time. You might think that if the stock market stayed open all day, it would give investors more opportunities to make money, while that’s true to some extent there’s more to it.
The stock market is open for trading Monday through Friday from 9:30 am to 4:00 pm Eastern Standard Time.
Trading hours are also referred to as business days or trading sessions. Most stock markets operate throughout the weekdays, but some of the trading session varies a lot from region to region, happening at different hours. For example, the London stock market hours will not interfere with those in Hong Kong.
Something curious about this is that there is a variety of midday breaks, like lunch break schedules. For example, some markets in Asia will close for lunch, while those in Europe and America do not have those breaks
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Despite the market working on fixed hours, you can find some irregular conditions like Premarket and After-Hours. Giving the traders the opportunity to buy or sell stocks outside of the regular trading sessions.
The premarket, as you can imagine, takes place before the market opens for the regular session, from 4 am to 9:30 am EST. On the other hand, the after-hour trading session happens after the regular session ends, from 4 pm to 8 pm EST.
I have an amazing blog post about trading options after hours, you should read it to have a better idea about it.
Those irregular trading sessions can happen thanks to the ECN (electronic communication network), where buyers and sellers are matched directly without a middleman. You can find many brokers in the US that allow investors to trade those sessions, but costs and fees can vary a lot,
There are a couple of reasons why the stock market closes, and many of them involve four aspects: volatility, tradition, sleep, and n risks. As you can imagine, a threadlike volume can lead to major risk, since most institutions will be closed and most retail traders are sleeping, so, there will be low liquidity.
This will lead to a narrow traded market that will be more volatile than usual, with a more baggy spread on the bid and ask prices. Also, 24/7 stock trading would mean tons of less sleep for many people involved in the area like advisers, traders, bankers, and brokers.
Despite that, there are some benefits that come with 24/7 trading, you’ll be able to respond quickly to news, jobs data, and quarterly earnings reports. Also, it can come in handy for people with regular jobs and kids, that have a day full of activities.