Regular Hours vs. After Hours
The New York Stock Exchange opens at 9:30 am and it closes at 4 pm Monday through Friday, with the exception of certain holidays. However, even after 4 pm, there is often a period of an hour or two where trades still take place. However, these trades don’t occur on the New York Stock Exchange, but typically on smaller, private exchanges. In addition, a period of trading like this occurs just prior to the market’s opening. This is often called pre-market trading, but sometimes it is also considered part of the after-hours period.
Risks of Trading in the After Hours Market
Because the stock exchange relies on investors trading with one another, trading after hours when the volume is low does run risks. According to the US Securities and Exchange Commission your ability to invest accurately may be impeded by the following:
- Inability to see quotes
- Lack of liquidity
- Larger quote spreads
- Price volatility
- Bias toward limit orders
- Competition with professional traders
- Computer delays
Should You Trade in the After Market?
The experts typically recommend that individual investors do not trade in the aftermarket, although most online brokers will allow you to buy and sell during this period. The lower volume can make for some dramatic surges and drops, so it definitely isn’t for the weak hearted. However, if you have done your homework, then there’s no fundamental reason that purchasing a stock in the afterhours market should be any different from at any other time of the day.
“After-Hours Trading:Understanding the Risks.” U.S. Securities and Exchange Commission (Home Page). N.p., n.d. Web. 8 Nov. 2010. http://www.sec.gov/investor/pubs/afterhours.htm.
“Don’t Get Burned Trading After Hours (CTIC, IRBT, JMBA, MVIS).” Fool.com: Stock Investing Advice | Stock Research. N.p., n.d. Web. 8 Nov. 2010. http://www.fool.com/investing/general/2010/07/29/dont-get-burned-trading-after-hours.aspx.