A stock market or a stock exchange is a physical place or digital platform where day traders and other types of investors buy or sell stocks or shares of publicly listed companies.
The Frankfurt Stock Exchange, founded in the late sixteenth century, is the world’s oldest stock market.
A stock or a share represents a percentage ownership in a publicly-traded company. Each share you own entitles you to a small fraction of the b company’s assets and profits.
Companies offer and sell shares to the public to raise capital for general corporate purposes or other uses.
Stock prices are dictated by the basic law of supply and demand. All other factors like earnings, balance sheet, and debt affect the desirability of buying or selling a stock.
For instance, if a company reports strong quarterly earnings, demand for its stock may increase, thus pushing the price higher.
Stock Market Trading Hours
There are many stock markets across the globe, with most of them operating throughout the weekdays. But the timetable of trading hours varies considerably depending on each region or country.
Stock markets kick off their trading sessions at different hours. For instance, stock market hours in London will not reflect those in Tokyo or Hong Kong, because of general differences in work culture and politics.
There are also a few stock markets that close for lunch breaks, particularly those in Asia, whereas those in the U.S. and Europe don’t have such breaks.
Stock markets also have different operating hours than those of other financial markets. For example, most U.S. stock exchanges open at 9:30 a.m. ET and close at 4:00 p.m. ET.
The forex market, on the other hand, is a seamless market that allows traders to trade currencies 24 hours a day, five days a week.
NYSE and Nasdaq Operating Hours
The New York Stock Exchange (NYSE) is the biggest stock market in the world, with an equity market cap of slightly over $27.7 trillion as of December 2021.
Roughly 2,400 companies, including many blue-chip companies like Boeing (NYSE: BA), Berkshire Hathaway (NYSE: BRK.A), Apple (NASDAQ: AAPL), JPMorgan Chase (NYSE: JPM) are listed on the NYSE.
The Nasdaq, which is based at 151 W, 42nd Street, New York City, is the second-biggest stock market in the world.
Other major stock markets include the Tokyo Stock Exchange (TSE), Shanghai Stock Exchange (SSE), Euronext, and the London Stock Exchange (LSE).
As earlier mentioned, the regular stock trading hours for the NYSE and the Nasdaq are Monday to Friday at 9:30 a.m. ET to 4:30 p.m. ET.
While the NYSE and the Nasdaq don’t close for lunch, there is generally less trading at midday. Most liquidity for the stock market is found at the first and final hour of the regular trading session.
The regular trading session for the U.S. stock market is shorter than that of the United Kingdom – totaling just 6 hours and 30 minutes.
A shorter trading window means less volatility, since most of the news gets released while the market is closed, offering every trader time to analyze the information before they make a trade.
Premarket and After-Hours Trading Sessions
It is also possible to trade stocks on U.S. stock markets outside of the regular trading day, in two extended trading sessions: pre-market and after-hours sessions.
The pre-market trading session takes place from 4 a.m. ET to 9:30 a.m. ET, before the market opens for the regular session. After-hours trading occurs after the end of the regular session, between 4 p.m. and 8 p.m. ET.
Many U.S. stockbrokers allow customers to trade in these extended sessions, although the procedures and costs can vary. The trades are performed on electronic communications networks (ECNs), and directly match buyers and sellers instead of using a middleman.
Pre-market and after-hours trading sessions allow traders to react to company earnings reports and other major news that is typically released before or after the regular trading session.
Stock Market Holidays
On some federal holidays, U.S. stock markets close for the entire day. For example, the NYSE and the Nasdaq will remain shut on the following holidays in 2022.
- Monday, January 17: Martin Luther King Jr. Day
- Monday, February 21: Washington’s birthday
- Friday, April 15: Good Friday
- Monday, May 30: Memorial Day
- Monday, June 10:Juneteenth National Independence Day
- Monday, July 4:Independence Day
- Monday, September 5: Labor Day
- Thursday, November 24: Thanksgiving
- Monday, December 26: Christmas
The NYSE and the Nasdaq end their regular session at 1 p.m. ET on early-closure days, typically the days before and after a market holiday.
While stock markets close to observe the aforementioned holidays, they are also sometimes closed due to national emergencies. For example, the NYSE and Nasdaq were closed for a week in the wake of the terrorist attacks of September 11, 2011.
You can see market holidays for 2022 and 2023 here.
Why do stock markets close? Why can’t they be open 24/7?
Have you ever wondered why stock markets don’t allow round-the-clock trading?
Continuous trading would have some advantages, like the ability to respond immediately to news — such as U.S. jobs data, or Tesla (NASDAQ: TSLA) earnings.
Individual traders would also enjoy the convenience of trading at 10 p.m. ET, after putting the kids to bed or finishing daily chores.
Additionally, nearly every stock market component is digitalized and the extra commission the exchanges would earn would be more than enough to pay for the additional staff needed to support a 24/7 operation.
But the reason traders can’t buy or sell stocks 24/7 is mainly because thin trading volumes outside regular hours amplifies risks.
There would not be enough liquidity late in the night when institutions have closed for the day and people are asleep.
A thinly traded market tends to be more volatile is also likely to have wider spreads between bid and ask prices. This makes it harder for new and inexperienced traders to trade without getting nickel-and-dimed.
24/7 stock trading might also mean some sleepless nights, not only for traders who keep a close eye on their stock portfolio, but also for stockbrokers, financial advisers, bankers, and other people who work on Wall Street.
Bottom Line
Stock markets help individual investors and traders to buy or sell shares of publicly-listed companies. They also help companies raise capital so that they can expand their businesses.
U.S. stock trading is concentrated during the regular session, with more than 90% of trades executed between 9:30 a.m. and 4 p.m. ET.
As technology advances, someone will develop a product that is likely to change the minds of the authorities who decide market hours. But until then, we can only imagine what round-the-clock trading would be like.
The post Why The Stock Market Closes appeared first on Warrior Trading.
