The Evolution of Trading: Unlocking the 24/7 Trading Market

The global market landscape has undergone significant transformations over the years. Historically, markets such as the Australian Securities Exchange (ASX) operated with limited hours, typically opening at 10:00 a.m. and closing at 4:00 p.m.

In recent years, the trading environment has evolved to accommodate global investors and retail traders. Notably, there is a growing trend towards 24-hour stock trading in the US, with exchanges and brokerages adapting to meet this demand.

Nasdaq, the second-largest U.S. stock exchange, plans to implement 24-hour trading five days a week. The New York Stock Exchange (NYSE) has also extended its trading hours to 22 hours daily, approved by the SEC in October 2024.

The SEC has granted approval to 24 Exchange (24X), a new trading platform, to operate the first round-the-clock stock exchange in the U.S. Brokerages like Robinhood and Interactive Brokers have introduced extended-hours trading, offering access to a broader range of U.S. stocks and ETFs.

The shift to 24/7 trading has sparked concerns among some investors. However, this change is not the end of the investing world. It’s essential to adapt to the evolving market landscape. Those who oppose expanded trading hours often operate from a limited mindset. Their concerns revolve around a few key points.

Overcoming Concerns About the 24/7 Market

1. Misconceptions About 24-Hour Market Volatility

Increased volatility is a common concern. However, most people misinterpret volatility. It’s not just about prices moving; it’s a natural function of all systems. Volatility exists regardless of trading hours. We’ve seen high volatility with markets trading only eight hours a day.

2. The Liquidity Issue in 24/7 Markets: A Misunderstanding

Some worry that liquidity will be an issue. However, this assumes liquidity won’t increase. We can learn from the FX market, which is already open 24/7. It’s not a single, homogeneous market, but rather a series of discrete markets opening sequentially. Liquidity flows and peaks during overlap hours, such as between London and New York. With extended hours, local traders can enter positions in the early evening, rather than waiting until nighttime. Moreover, it’s unlikely that Asia and Europe won’t take advantage of extended hours, providing increased liquidity.

3. The “End of the World” Argument Against 24/7 Trading

Some claim that 24/7 trading will lead to reckless trading. However, this argument is weak. Those inclined to trade recklessly already do so in FX and crypto markets.

Embracing Change in the Market