Stock Market Trading After Hours

There was a time when one could trade only in tandem with the stock market – that is to say, from the moment it started to the moment the exchange closed. In most countries, that refers to the time from 9:30 am to 4:00 pm.

However, for almost a decade, trading has been allowed to continue beyond this time frame. This practice of trading in the non-trading hours of a stock exchange is called stock market trading after hours. Initially this type of a trading option was available only to high profile people like high-net worth-individuals and institutional investors, the growing popularity of online trading has made this practice more accessible to the general investor.

The rise of stock market trading after hours can largely be attributed to the arrival of Electronic Communications Networks. These are interfaces which allow investing parties, be it individuals or institutions, to interact anonymously, thereby hiding their actions. So, essentially, you can trade with other investors through ECNs beyond the hours of operations of the stock exchange.

It is a veritable avenue for great gains, but before one rushes headlong into the whole deal, he should be well aware of the risks and dangers involved in stock market trading after hours.

Firstly, there is less liquidity around stock market trading after hours observes a much lesser number of buyers and sellers as compared to actual trading in regular hours. This may translate into lesser volume of trading for stocks and increased difficulty in turning your shares into cash.

The lowered trading volume also results in a high degree of difference between the bidding prices and the asking prices in stock market trading after hours. This makes it harder for the individual to carry out an order at a price that he considers favourable.

Stock market trading after hours is also much more volatile as compared to regular hours trading, and individual is very likely to be witness to severe fluctuations in prices, making decision making all the more difficult.

Most importantly, stock market trading after hours has traditionally been the domain of large investors who have access to far more resources than the average investor, as well as a greater degree of experience and valuable knowledge. These however, were the only cons. The pros of after hours trading are equally praiseworthy.

Because an individual can trade round the clock so an investor can react quickly when he hears the breaking news stories and the most recent information. Essentially, it makes you prepared for what might happen in regular hours trading.

Secondly, the high volatility associated with stock market trading after hours also means the availability of some very attractive prices. One can buy that favoured stock at an unbelievably low price, and conversely, sell it off for astronomically high amounts. Stock market trading after hours multiplies the profit making opportunity of regular hours trading manifold, allowing an investor to make exorbitant profits in half the time.
Thus, stock market trading after hours is certainly an option worthy of consideration.