Investors find that After hours trading activity provides leading indicators for next day trading activity as well as insight into Stock Market trading activity within hours of the close of the U.S. after-hours market.
After Hours activity is shown on most stock market sites like NASDAQ and DOW JONES after 4p to about 8:00 PM every trading day (actual trading starts at 4:00 PM EST).
Extended trading data from The Nasdaq Stock Market is shown on a 15 minute delayed basis. After-hours trading is only shown if the stock if it is a component of the Nasdaq-100 Index.
Things have changed!
The Stock Market has traditionally been open for business from 9:30 a.m. to 4:00 p.m. EST, but the advent of Electronic Communications Networks (ECN) has now provided the ability for investors like you and me to trade after the normal hours, should we choose to.
That's the good news.
The no so good news is that there is a higher level of risk. It is therefore extremely important that you understand the risks of After Hours Trading before hand.
Where should you begin?
With your online discount broker! Do they have any disclosure statements concerning extended hours trading?
READ the disclosure!
Is this a key part of your strategy?
Then make it an important criteria when selecting your broker.
Make no doubt about it - after hours trading does present some lucrative opportunities!
BUT - the risks are a lot higher!
Understand the Risks
Consider the following:
1. You may not be able to see or act on stock quotes.
2. You may not be able to convert your stock into cash because some stocks do not trade at all after normal trading hours.
3. Due to large spreads between the bid and the ask price, your order may not be executed as easily.
4. You may experience greater price volatility.
5. This market has a bias toward limit orders.
6. You are competing with large institution traders with more resources than you have - ie more information.
7. Computer delays may occur as you are routed to ECN's delaying the execution of your order.
Moral of this story? Do your research!