Candlestick Trading Blog
May 29, 2009
Trading After Hours
| Trading after hours became popular along with the rise of online investing in the late 1990's. The majority of stock trading takes place during the day from 9:30 a.m. to 4:00 p.m. on the major stock exchanges. Trading before and after market hours became available to those high-net worth investors, and it also became available to major institutional players. Initially, stock investors were only able to buy and sell stocks during the regular business hours of major stock exchanges. Trading after hours became easier and more accessible with the advent of electronic trading and electronic communications networks, also known as ECNs. Basically, any investors who can make the necessary arrangements to trade via an ECN have the ability to trade stock after hours. There are of course some requirements to practice electronic trading. For example, you must be a customer of a brokerage firm that has access to an ECN or that has one of its own. Keep in mind that some electronic communications networks are unregulated, some are regulated and some are sidelines of broker-dealers. Make sure you know this before you sign up with a brokerage firm. There are of course risks associated with trading after hours just as there are risks associated with trading stock during regular hours. For starters, there is less liquidity. There are fewer investors participating and there are fewer investors available to react to news and other sources of information regarding public companies. Other risks include those associated with limit orders and the execution of stock orders. Those investors who are unfamiliar with limit orders find it difficult in the ECN market and sometimes the market centers that your orders interact with may not include all of the possible execution venues. This means that your order may not be executed at the most favorable stock price available across all possible venues, therefore limiting those prices available among all possible market participants. There also is a possibility that your order may not be executed at all. Due to this, it is highly recommended that only seasoned investors participate in after hours stock trading. The costs associated with trading after hours include more than just the regular commissions. The lack of liquidity mentioned previously, can make it more difficult for you to get the price that you want when online trading after hours. There are also severe price swings that take place when after hours trading and there is limited information regarding price quotes. Trading stock after hours is still a great way to make money investing in stock. Continue to learn more about it and find out if it is an option for you. Online Stock Market Reviews presented live via the internet by Stephen Bigalow |
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