The Benefits of 24 Hour TradingFairly obviously, 24 hour trading allows you to trade the markets when the underlying markets, e.g. the London Stock Exchange, have closed.
This let’s investors react to news that comes out when the markets would otherwise be closed.
Why stop speculating on the value of the UK stock market at 4.30pm when the US markets are still in full flow?
Why stop trading forex or gold or crude oil when those markets continue around the clock in other countries / time-zones?
Spread Betting and CFD Companies that Offer 24 TradingThe following firms offer these quasi-24 hour markets but only on the more popular markets.
Don’t expect round-the-clock trading on single shares. No firm is currently stupid enough to offer that.
It’s Not Quite 24 Hour Trading!When the brokers offer 24 hour forex markets these are typically open from about 11pm on a Sunday and trade right through to about 9pm on the following Friday (UK time).
With commodities and stock indices it’s a slightly different story. These markets will close for a break each evening.
I’m told this is to help settle some markets. That’s ‘settle’ as in ‘close some trades’ rather than ‘getting the markets to chill-out’.
Note that there is an “Oi markets! chill-out!” function but that’s called going “Limit Down” and is a separate story.
Anyway, expect the commodities and stock indices to close each evening.
E.g. Financial Spreads will close their 24 hour stock markets from 9.15pm to 9.30pm & again from 10.15pm to 11pm.
Your Trading Costs Can Increase During 24 Hour MarketsThe spread betting and CFD firms incur larger risks during the small hours (their data isn’t as good and there are fewer places for them to hedge off their positions).
To compensate for this, they often charge a wider spread during the small hours.
E.g. Financial Spreads don’t change the spreads on their overnight forex market because they still have plenty of market data (and price feeds) to work from.
However if you trade the FTSE 100 then their normal 0.8pt spread will move to around 4 or 5pts between 9pm and 7am UK time.
Where Does 24 Hour Trading Go Wrong?The small issues:
Chart Showing Muted Overnight TradingIt’s not always that exciting overnight, you often see the chart below, i.e. somewhat muted trading.
The box highlights 11pm to 6pm and a small trading range.
Of course, overnight trading on 8 November 2016, when the Donald Trump win was a bit of a shock, we saw the chart below.
Being able to trade the news in the small hours can have its advantages.
The box highlights 11pm to 6pm and everyone hitting the “SELL” button.
Overnight Financing Charges vs 24 Hour MarketsThe overnight financing charges are a bit of a red herring with 24 hour markets.
If the markets closed at 4.30pm, like they do with UK shares, and you keep your trade open overnight then you still need to pay the overnight financing fee.
It doesn’t matter if the market is 24 hours or not, if you keep your trade open overnight then you are charged the overnight financing fee. Having said that, financing fees are normally the baserate + 2.5% and that’s a pretty fair cost.
Also, the financing fee is often charged at around 11pm (it’s rarely charged at midnight, it’s easier to make charge when the markets close for a short break). So if you open trades in the small hours there is no financing fee unless your trade is still open circa 11pm the next evening.
Weekend Financial Markets
Remember: Spread betting, CFDs and forex trading carry a high level of risk. You can lose more than your initial investment. These products are not suitable for all investors. Only speculate with money that you can afford to lose. Make sure you fully understand the risks involved and seek independent financial advice where necessary.