Greed & Gluttony Part #2 – 24 Hour Trading

There is nothing quite like Wall Street trying to wrap a new way to screw thousands of investors in a blanket of B.S.

Online brokers are our access to the markets. Without them, we’d be up the creek without a paddle.

But if you think folks are looking out for the customer’s best interests, you’re probably an advocate of universal basic income (sorry, it’s a dumb idea).

However, we must applaud their latest gaslighting efforts, which are more creative than ChatGPT on acid.

This idea of 24-hour trading is so ludicrously disastrous it would be laughable if it weren’t so likely to be received with open arms by the average investor.

But here we are.

Back in the Day…

Did you know Saturday trading used to be a thing?

In 1871, with the introduction of the first stock ticker, the NYSE extended its trading to 10 a.m. to 3 p.m. on Saturdays.

Those Saturday hours persisted until 1952, when they were discontinued as a means to increase competition.

For nearly half a century, those extended trading hours lay dormant.

In 1995, the NYSE introduced Extended Trading Hours (EHT), allowing investors to trade certain stocks from 4:15 p.m. to 5:15 p.m.

These hours were added following pressure from institutional and individual investors who wanted to “react” to news and events outside regular hours.

By 2006, those hours were extended from 4 a.m. to 9:30 a.m., and from 4 p.m. to 8 p.m., where we sit today.

In 2018, EVERYTHING changed…

Trading Beyond

Remember, these hours were added for institutional traders and large investors to react to news events.

While they were open to retail investors, they had a specific purpose.

But the pigs of Wall Street needed to be fed.

So, in 2018, TD Ameritrade introduced 24-hour trading on many widely held exchange-traded funds (ETFs).

Robinhood followed with 24-hour weekday stock trading in May of this year, along with Interactive Brokers in June.

Do not fool yourself into thinking this was done for your benefit.

24-hour trading is a money suck for retail investors and a time bomb for the markets.

There is no reason anyone needs to trade U.S. equities at 3 a.m.

And anyone who thinks this is a good idea is headed for a rude awakening.

Sadly, the most inexperienced investors will be excited by the new and shiny.

They don’t understand the different rules that apply to extended hours.

For example, you can ONLY place limit orders. Market orders aren’t allowed. And your limit orders won’t be filled unless the quantity is matched exactly.

Plus, the liquidity and volume are much lighter, making the spreads between the bid and ask prices wide enough to crash a 747 MAX through.

The few traders who successfully play extended hours tend to stick with highly volatile penny stocks with headlines like micro-cap biotechs.

Who’s on the Other End?

Here’s a fun mental exercise…

If the exchanges are closed, who’s taking the other side of the trade?

Great question.

In the overnight hours, brokers often send orders to a single alternative trading system (ATS) that doesn’t require either displaying orders to the public or providing price protection.

During pre- and post-market hours, brokers often send orders to market makers like Citadel.

Remember them?

They’re the payment for order flow people that screwed thousands during the GameStop debacle.

Brokers Love it!

Bloomberg published a great exchange it pulled from the Reddit boards, the supposed target audience of 24-hour trading:

User #1: Why would anyone want this?

User #2: Because gamblers are gonna gamble!

Vlad Tenev, head of Robinhood, said:

It allows our customers to better manage their risk and take advantage of opportunities, no matter what time of day they arise.

This is more packaged bologna than Oscar Meyer sells in a year.

No one needs to trade overnight to manage risk unless they’re overseas.

And for the small sub-segment of folks in Hawaii or Europe with access to a U.S. bank account, you won’t improve your performance by enough to beat the spread.

24-hour trading is a money-grab by brokers who lost money after Robinhood offered free stock trades in a race to the bottom.

Now, it’s just a war for orders they can sell to market makers.

The Silver Lining

But it’s not all doom and gloom.

While 24-hour trading presents significant risks, especially for retail investors, it’s essential to remember that knowledge is power.

Staying informed can provide a critical edge.

It means you’ll need to study the overnight price action, which isn’t just extra work but must be completed in a short window.

Fortunately, Jim Woods never sleeps (that we know of).

Every morning, he sends out the Eagle Eye Opener, a comprehensive look at everything moving the markets while placing it all in the proper context.

This isn’t a summary of the news.

It’s an investing blueprint to help kickstart your day and set you up for success, whether you’re an active trader or investor.

You learn what key data is due out that day…

…the biggest risks and opportunities Jim sees…

…and best of all…

…each issue costs less than you’d pay for a cup of coffee.

Click Here to Try it out for 30 Days!