|Many investors understand the after hours trading quotes can provide them with a pricing indicator for the next day?s trading activity. After hours trading quotes can also offer some insight into the trading activity of international markets that open for trade after the US market has stopped trading for the day.
Remember, these are just insights. They aren?t a true representation of how that stock?s price will react the following trading day, but many investors are still able to glean information and develop stock analysis figures from the after hours prices and movements regardless.
The New York Stock Exchange and the NASDAQ are open for trading between 9.30am and 4.00pm Eastern Time. Originally, only high net worth investors and institutional investors were given the opportunity to trade after hours. The introduction of ECN, or Electronic Communications Networks, in 1999 allowed smaller investors to trade after hours.
Many investors saw this as a major advantage, as the ability to trade directly with other investors via registered ECN brokerage firms allowed them to reduce the cost of transactions and also to lock in any pricing changes that occurred outside of regular trading hours.
However, there are some risks involved with trading after hours.
Receiving after hours trading quotes can sometimes offer beneficial pricing advantages, but it?s important to remember that there are less buyers and sellers trading the after hours market as compared to the regular trading hours. This lower volume might mean less liquidity, or more difficulty in selling your stocks when you want to or at the price you intended.
You?re also unable to see prices from other sources. During regular trading hours, brokers are able to access pricing from multiple sources and then allow you to buy or sell at favorable prices based on several quotes. With after hours trading quotes, the source for brokers is generally limited to the one price.
The pricing of stocks traded after hours also tends to have a higher level of volatility compared to during regular trading hours. You may find that the prices are not always as current as they could be and are regularly shown with a 15 minute delay, so always double check your trade order before processing it for execution.
Placing a trade during regular trading hours usually means you?re able to set a limit order on your trades. Many ECN brokerage houses don?t allow after hours trades to have a limit order placed, which can often mean your order won?t be matched or fulfilled.
Finding after hours trading quotes is relatively simple. The majority of brokerage houses offer quotes for trading during extended trading hours. You can also find plenty of information on the NASDAQ website for stocks that are trading after hours.
While the after hours trading market offers a greater amount of flexibility and convenience, newer traders should spend some time learning about trading stocks and developing trading strategies during regular trading hours.