We all want to buy lower and sell higher on the stock. But sometimes, particularly in the aftermarket and pre-market time, even though there is no special news on that stock, we still can see a crazy highest price or lowest price is drawn on a candlestick. I understand the lowest price might be real because everybody tends to buy lower. But how the highest price can be true? Is it the real event somebody bought that stock at that high price? Any expert can explain this to me, please? thanks.
For every trade that occurs, there is a buyer and a seller. Ignoring special circumstances like the seller just needs the money, one of these traders is wrong.
Your premise is that the lowest price might be real because everybody tends to buy lower. I'd ask you this in return. The market is up 50% in 9 months and is it trading at record highs. Why is anyone buying anything? The answer is that many believe that the market is going higher. They may be right, they may be wrong but either way, they are expressing their outlook with their dollars.
As to your question about the pre- and post market, that's a bit of a different beast. It tends to be illiquid with much wider spreads and because of reduced volume, it is more volatile. It takes far fewer shares to move price after hours and that is reflected in wider price swings. With many stocks, that same share volume that moved after hours price would likely be swallowed during the regular trading session, barely moving price, if at all. And to a lesser extent, sometimes, that crazy price is just that, caused by a fat fingered trade and sometimes it's just bad data.
A word of caution: Do not trade during after hours unless you are an experienced, decisive trader. The exception to this would be if you are either closing or hedging an existing position at a good price.
There is always a buyer at the highest price and a seller at the lowest price. It isn't necessarily bad, though. The seller at the lowest price could have bought a year ago at an even lower price. The buyer at the high price may expect that the stock will continue to grow and not be concerned with the entry price. If you had bought Amazon at the "high" price for a day 5 years ago (somewhere round 670), you'd still have about a 400% return.
Buy-and-hold investors shouldn't worry about daily fluctuations - they are looking for long term growth. Only day traders stress over the daily high/low.
The after-hour trades are typically for very small quantities, but they are really happening as shown.
Anecdotal: For a while, I made some bucks by entering low buy and high sell limit orders after 4 pm for some less frequently traded securities, and here and there 1 or 5 shares get traded. Overall, it’s not worth the effort, as you have to clean up every morning what you bought and sold, so it’s an hour work for 50 or 200 $ every other day maybe.
In a nutshell, after hours, “the kids are playing”, and you can steal some chocolate from them if you care to.
For heavy volume stock, like AMZN or TSLA, after hours is normal business, with a bit more volatility.