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The low down on After Hours Stock Trading

After hours trading is where a stock trader trades after the conventional trading hours of the major exchanges. For example trading stocks at 4.30pm on the New York Stock exchange would be considered after hours trading as the NYSE closes at 4pm.

Can I trade after hours?

Yes, nowadays almost everyone can trade after hours. It used to only be an option to "big players" in the stock market like hedge funds and mutual fund mangers, but with the recent invention of ECN networks, it has opened the doors to smaller traders too.

After Hours Stock Trading Risks

If you have read any of the other articles on howtotradestocks.org, you may have come across me talking about how risky stock trading can be. The truth is, after hours trading carries additional risk factors and it would not be wise to ignore these. Some of the big ones include:

Orders not guaranteed

Whilst an order is never actually 100% guaranteed, there is a greater risk than an order won't be carried out after hours. This is due to the lack of liquidity, there is the risk there might not be another party to take the other side of your trade.

Bigger Spreads

Again due to the lower liquidity levels, trading after hours may result in higher spreads than normal.

Higher volatility

After hours trading is often more volatile than normal trading. News events may move the market significant more than they normally would. This might suit some traders who prefer to trade in highly volatile times.

Price uncertainty

As well as the prices being highly volatile out of hours, the next trading day may not open where after hours trading finished.

Broker for after hours trading

Not all stock brokers offer after hours trading. Zecco don't offer it at all. Tradeking and Optionshouse allow trading one hour after the close and one hour before the opening. Optionsxpress offer trading 7am-9.30am and 4pm-8pm.

Conclusion

These are the main additional risk factors associated with after hours stock trading. There are many more minor ones too. If out of hours trading is for you, again depends completely on your appetite for risk. If you are looking for the potential for high returns, out of hours stock trading might just be for you.