There is a lot of debate as to whether or not the stock market should be open 24 hours a day. On one hand, you have people who argue that the stock market should be open all day, every day because it would give investors more opportunities to make money.
On the other hand, you have people who argue that the stock market should only be open for a certain number of hours because it would make the market more stable and less volatile.
In this article, we will explore both sides of this argument and conclude as to what is best for the stock market.
Why the stock market is not open 24 hours
The stock market is not open 24 hours because it needs time to process all the trades that happened during the day. If the stock market were open 24 hours, there would be too much activity and not enough time to process everything. This could lead to mistakes being made and people losing money.
The stock market is only open for a certain number of hours so that everyone has a fair chance to make money. Another reason why the stock market is not open 24 hours is that it can be very volatile. If there are too many trades happening in a short period of time, prices can start to fluctuate rapidly, which can be very dangerous for investors.
Having set hours gives everyone a chance to see how the market is doing and make informed decisions about their investments. It is important to remember that everyone should have the same opportunity to make money in the stock market.
This is true for both retail investors with little time and investment companies with employees working around the clock. So, even though it may be frustrating to not be able to trade stocks at all hours of the day, it is arguably for the best.
Why is the stock market only open for 6 hours?
On top of not being open during the weekends, the stock market is only open for six hours a day during the week. That’s barely enough time to check your portfolio, let alone make any trades. So why does the stock market have such limited hours? And is it even true that the stock market is only open for 6 hours?
The New York Stock Exchange (NYSE) trades from 9:30 a.m. to 4 p.m. ET. This means they are open for six and a half hours, not six. The NYSE is the largest stock exchange in the world, so when people say the stock market is only open for six hours, they are usually referring to the NYSE. Most people refer to the stock exchange only being open for 6 hours because that’s when the majority of trading takes place.
There is a lot of activity during those six hours, which is why most people consider that to be the only time the stock market is open. The most common reason why it's only open for six hours is that that's when the majority of people are available to trade.
After all, you can't trade stocks if there's nobody to buy them from you. But there’s another reason why the stock market is only open for six hours a day. Back in the early days of trading, stocks were traded exclusively on physical exchanges like the NYSE floor.
This meant that all trades had to be conducted in person, which was only possible during business hours. Nowadays, most trades are executed electronically, which means they can happen 24/seven. So why doesn’t the stock market trade around the clock?
Main reasons why the stock market is not open 24/7
It comes down to two things: liquidity and price discovery. When there are more buyers and sellers in the market, it’s easier to find a fair price for security. That’s why trading is heaviest during normal business hours in the U.S. when both Wall Street and Main Street are active. As for after-hours trading, it does exist, but it’s generally less liquid and more expensive than trading during regular hours.
That’s because there are fewer participants in the market, which can lead to wider bid-ask spreads (the difference between the highest price a buyer is willing to pay and the lowest price a seller is willing to accept).
Pre-market trading and post-market trading are two other types of after-hours trading. Pre-market trading happens before the stock market opens, while post-market trading takes place after it closes.
These sessions are even less liquid than regular after-hours trading, so spreads tend to be even wider. So if you’re looking to trade stocks, you’re better off doing it during regular hours. But if you must trade after hours, know that it might cost you a little more.
Bottom Line: While the stock market has come a long way since its early days, it still doesn't operate 24/7. And there are good reasons for that. Most notably, liquidity and price discovery are both better during regular trading hours when more participants are active in the market. So if you're looking to trade stocks, stick to normal business hours.
Benefits of stock markets being open 24 hours a day
There have been some stock market exchanges that have carefully considered the benefits of allowing stock trades to happen nearly 24 hours a day. Cboe Global Markets, Inc. is an example of an exchange that's done this. After careful consideration, they've decided that certain benefits make being open for extended hours worth it.
You may be wondering, what are the benefits of stock markets being open 24 hours? Some benefits include:
More time to trade
If you're in a different time zone or have a job that doesn't allow you to trade during traditional hours, being able to trade at night or early in the morning could be beneficial for you.
The ability to react quickly to news
Whether it's earnings reports, political events, or something else, you may want to be able to trade as soon as possible after hearing the news.
Less chance of price manipulation
With more people trading throughout the day, it could be argued that there's less opportunity for one group of traders to manipulate prices during after-hours trading. This is because, with more people trading, it would be more difficult to buy or sell enough shares to move the price.
More market participants
By having the market open for extended hours, there will be a larger pool of market participants. This could lead to more efficient pricing since there would be more buyers and sellers in the market.
These are just a few benefits that make extended hours trading worth it for some stock market exchanges. Consider what would work best for you and your trading goals before making any decisions.
Drawbacks of the stock market being open 24 hours
While it may seem like having the stock market open 24 hours a day is a good thing, there are actually some drawbacks. For one, it can be difficult for traders to keep up with the constant changes.
Stress and Higher Rates of Mistakes
Extended trading hours can add to fatigue and make mistakes more likely. It can also lead to burnout, which is when a trader becomes so emotionally and mentally drained that they can't make rational decisions anymore.
Mental Health
Another drawback is that being open 24 hours a day would bring scrutiny from mental health advocates. Having a bad day in the markets can be offset with a break. If the markets never close, there could be more pressure on traders leading to higher instances of anxiety and depression.
Increase Risk of Trading Addiction
The potential for higher rates of trading addiction is also a concern. If people can trade at all hours of the day and night, some may develop unhealthy trading habits. This can cause problems in all areas of life, including personal relationships and work.
So while there are certainly benefits to having the stock market open 24 hours a day, there are also some potential downsides that should be considered. As always, weigh the pros and cons carefully before making any decisions about your investment strategy.
Markets that are open 24 hours
- Forex
- Cryptocurrencies
- Some commodities
Some people may think that the stock market should be open 24 hours because other markets, like the Forex market, are open 24 hours. However, the Forex market is different because it is decentralized and doesn't have a physical location where trading takes place. This means that there is no need for a break-in between trading sessions.
The stock market, on the other hand, is a physical market where trades take place between brokers in person or through electronic systems. This type of trading takes time to process and settle, which is why the stock market is not open for 24 hours.
Cryptocurrencies are another type of market that is open 24 hours. However, Cryptocurrencies are not regulated by any government or financial institution. This means that they can be very volatile and risky to invest in. It is important to do your research before investing in Cryptocurrencies, as they may not be a good fit for everyone.
Some commodities are also traded nearly 24 hours a day. However, most commodities are not as liquid as the Forex market or Cryptocurrencies, so it is important to be aware of the risks before trading.
Conclusion
Even though it may be frustrating at times, the stock market is not open 24 hours for good reasons. It needs time to process all the trades that happened during the day and it can be very volatile if there is too much activity.
It is important to remember that everyone has the same opportunity to make money in the stock market, regardless of when they trade. So, even though you may not be able to trade stocks at all hours of the day, you can still be a successful trader by following a well-thought-out investment strategy.