Trading sessions outside the regular 9:30 to 4:00 Eastern US equity session, with thinner liquidity and wider spreads.
Pre-market runs roughly 4:00 to 9:30 a.m. Eastern and after-hours from 4:00 to 8:00 p.m. Most earnings reports and many economic releases land in these windows, so this is where the biggest gaps form.
liquidity is a fraction of the regular session, bid-ask-spreads are wider, and only limit-orders are usually accepted. A print in after-hours can be misleading because a few hundred shares can move the price several percent.
Example: a company reports after the close and the stock jumps from $100 to $112 on 300,000 after-hours shares. At the next open, with real volume, it settles at $106.
Original diagrams for the ideas on this page. Illustrative, not real market data.
The bid-ask spread. Buy orders sit below, sell orders above, and the gap between the best bid (50.01) and best ask (50.04) is the spread you pay to cross. Bar length shows the size resting at each price.
Educational only, not advice. Spotted an error? Post in Site Feedback.