After Hours Stock Trades

After-hours trading (AHT) refers to the buying and selling of securities in major stock exchanges after the regular trading hours. For example, if a stock exchange functions from 10.00 am to 5.00 pm, any trading done after its working hours is referred to as After-Hours Trading or AHT. This after-hours stock trades was earlier restricted to institutional investors and individual investors with high net worth. But today, this is an option open to the common investor also.

With the introduction of electronic communication networks, you find that a new era has emerged in the area of stock trading. The electronic communication networks, ECN for short, allow individual investors to interact electronically. But, there is one more advantage whereby it also allows large institutional investors to trade anonymously, thereby hiding their identities. The after-hours stock trade gives investors the scope to make more profits, but they should be aware of the imminent risks and dangers involved in these trades.

Some of the risks and dangers which go along with the after-hours stock trade are given below:

·         Unpredictability: The after-hours trade market is visited by very few people as compared to the day market and comparatively the trading is relatively thin. It is possible that you may experience severe price fluctuations.

·         Wide Margins: As there is a lower volume of trading, there may be a large disparity between the bid price and the asking price. It may be extremely difficult to buy or sell at a favorable price.

·         Lesser Liquidity: There are more buyers and sellers during the regular market hours than during the after-hours stock trade hours. As the volume of trading is far lesser than in the day time, it may be difficult to convert shares into cash.

·         Limit Order Bias: Many of the electronic trading systems accept only limit orders where you have to enter a price for your order to be executed. A limit order seals the price which means that you will not buy for more or sell for less. If your price is not accepted, your order will not be accepted.

·         Small Investors: When individual investors trade in the after-hours trade market, they would be trading with or competing with large institutional investors who have access to more resources than the average investor. They have more access to information than the individual investor.

·         Computer Delays: You may be subject to computer delays or failures resulting in your orders not being executed. In some cases you will have to cancel or change your order.

Do not be unduly worried as there are also a few benefits which go with the after-hours trading. As you can trade round the clock you have the chance to react quickly to any breaking news or information. Although you may find the market to be volatile, you can be lucky to find some really attractive prices at this time.