What Is After Hours Trading On The Stock Market - How To Trade After Market Close

What Is After Hours Trading On The Stock Market

A friend of mine recently asked my how it is possible that some stock prices still fluctuate although the stock exchange has been closed already. The answer lies in extended trading hours.

Extended trading hours are much different than the normal trading hours. There are other rules and if you want to participate you must know them. First of all, just because the regular trading hours are over it does not mean that there can be no other trades.

But where do these trades take place? Extended trading hours are usually for institutional traders but you can place an order as well as long as your broker supports it. Most modern online brokers do nowadays. What Is After Hours Trading On The Stock Market

You can often place trades and get executed until 7pm or 8pm EST. But it all depends on the volume and liquidity at this point. One thing is important. There are other rules and the liquidity is usually much lower than during regular trading hours.

If your broker takes orders you will have to place limit orders. Chances are high that you only get a partial fill or not filled at all. Or you get an odd lot. This means higher risk that you probably can not exit the trade when you want.

Another problem with after hours trading is the wider spreads. Because of the lower liquidity the spreads begin to widen. This means higher costs and higher risks for you.

Since private investors are rarely participating, you will compete with professional traders. This can also mean a higher risk to you.

Why would someone want to trade after-hours? There are good opportunities after hours as long as you know what you do. Companies do report earnings or important news after hours for example. This gives you a chance to react on the news and get in or out of a stock while other investors are still waiting for the next trading day to begin. Many traders enter after hours and exit the next day before the market opens. They made a profit before others even start trading. What Is After Hours Trading On The Stock Market

What Is After Hours Trading On The Stock Market - How To Trade After Market Close

By: Trading Expert

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