Recently, many investors have not yet fully understood the trading mechanisms of the U.S. stock market, especially pre-market and after-hours trading. In fact, these two periods have a much greater impact on stock prices than most people expect.

First, let’s talk about pre-market trading. In the U.S., pre-market trading starts at 4:00 a.m. Eastern Time and runs until 9:30 a.m., when the market officially opens. This time period may seem insignificant, but it is often the time when major information is reflected most directly. When companies release earnings reports, the government publishes economic data, or there is any sudden breaking news, investors will adjust their strategy in advance during the pre-market session. I’ve seen many stocks already drop by more than 5% in pre-market, and then experience even greater volatility by the time the market officially opens.

Take Alibaba as an example. In the second half of 2023, once news came out that Jack Ma and his family trust planned to sell a large amount of shares—together with the IPO of Hema Fresh and the suspension of the Alibaba Cloud spin-off—the stock price plunged more than 8% in pre-market. This is the power of pre-market trading—it directly affects the opening price, which fell by 8.67% compared with the previous trading day’s closing price.

However, pre-market trading also has limitations. You can only use limit orders; you cannot use market orders, because participation is low and liquidity is limited, and using market orders can easily leave you trapped. Also, not all brokers support pre-market trading, and even if they do, the supported time windows differ. Fidelity trades from 8:00 a.m. to 9:28 a.m., Charles Schwab from 7:00 a.m. to 9:25 a.m., but Niu can start trading as early as 4:00 a.m.

Now let’s move on to after-hours trading in the U.S. This is the trading session after normal trading hours (9:30 a.m. to 4:00 p.m. Eastern Time), and it generally continues until 8:00 p.m. Many people don’t know that after-hours trading can actually give the market more time to stay calm. Why do we say that? Because after-hours trading also only allows limit orders, and institutional investors generally don’t participate, so price fluctuations tend to become more stable.

I saw a case involving NVIDIA in December 2023. During the entire regular trading session, the stock price fluctuated greatly, rising from more than 461 to 472, with a spread of more than 2%. But during after-hours, because no new information was coming in, investors placed orders using limit orders, and the stock price quickly stabilized within a narrow range. This is essentially the real price the market arrives at after aggregating all information, and it is usually very close to the next day’s opening price.

If you want to profit from pre-market or after-hours trading, my advice is to closely follow news events. In normal times, keep a close eye on the fundamentals of listed companies; once there are major positive or negative news items, immediately adjust your positions according to the situation. You can also try setting a buy price lower than your ideal price or a sell price higher than your target—sometimes, you can end up getting unexpected fills.

Be especially careful with risk management. Liquidity in pre-market and after-hours trading is relatively poor, so you should not trade frequently in large sizes, and you should also be alert to quotes that look unreasonable. When news breaks suddenly, you need to be even more cautious—don’t let sudden news shocks push you into impulsive decisions.

If you feel the restrictions on pre-market and after-hours trading are too many, another option is CFD contracts. This trading method is not restricted by exchange hours—basically you can trade for about 24 hours a day and 5 days a week—and it supports both going long and going short, with leverage also being more flexible. However, CFD risks are also higher, so you need stronger risk management capabilities.

Overall, pre-market and after-hours trading provide investors with a longer trading window, and they can indeed capture some opportunities. But low liquidity and high volatility also mean greater risk, so you must have a clear trading plan and risk-control measures. Don’t let FOMO emotions lead you into chaotic trading—rational analysis is the key to long-term profits.