After Hours Stock Trading

After Hours Stock Trading. Making trades after market close.

After Hours Stock Trading

After hours stock trading refers to stock trading outside the traditional trading hours of the major exchanges, such as the New York Stock Exchange and the Nasdaq Stock Market. The traditional or regular trading hours have been for some time from 9:00 a.m. to 4:00 p.m. Eastern Standard Time. Trading outside these regular hours is not a new phenomenon. But it has generally been limited to high net-worth investors and institutional investors, such as mutual funds.

While after-hours trading promises greater opportunities and convenience for individual investors, it also involves significant risk. The after-hours market can be much more volatile and far less liquid. Before considering an after-hours trade, be sure to educate yourself about the risks. This trading is usually done through the Electronic Communications Network also called ECN.

Some of the risks associated with after hours trading on the stock market are:

• · You are unable to see or act upon any quotes. Just because you can get quotes on an ECN does not necessary mean you will be able to trade based on those quotes. You need to ask your firm if it will route your order for execution to another ECN. If you are limited to the quotes within one system, you may not be able to complete a trade, even with a willing investor, at a different trading system.
• There is a lack of liquidity. Liquidity refers to the ability to convert stock into cash. That ability depends on the existence of buyers and sellers and how easy it is to complete a trade. During regular trading hours, buyers and sellers of most stocks can trade readily with one another. During after-hours, there may be less trading volume for some stocks, making it more difficult to execute some of your trades. Some stocks may not trade at all during extended hours.
• · There is the possibility of a larger quote spread. There may be a big difference between the bid and the asking price because of the low volume of trading.
• · There may be a greater volatility of prices. After hours new stories may have a get impact on the prices of certain stocks and the prices may fluctuate much more than they would during regular hours.
• After hours trading may involve a lot of computer delays. This could have a great impact on your buying and selling activity.