After-hours trading depends on the desired market and ECN trading hours. The NYSE, Nasdaq, London, Euronext, and Tokyo Stock Exchanges offer after-hours trading. Investors must use an ECN and set a price, but orders may not be processed due to fewer people trading. The market is subject to greater volatility and investors may not secure desired prices.
Taking an after hours trade depends on the desired trading market that a trader is looking to use. The Electronic Communications Network (ECN) trading hours used also influence after-hours trading. Also, the success of an after hours trade depends on whether the market is a cross market.
There are several markets that can be used for an after hours trade. The New York Stock Exchange (NYSE), the Nasdaq Stock Exchange, the London Stock Exchange, Euronext and the Tokyo Stock Exchange are the five largest exchanges in the world that offer after-hours trading opportunities. An interested investor can start trading on these exchanges within 15 minutes to one hour after the closing bell, depending on the particular exchange. Typically, after-hours trading on these exchanges extends to the following day’s opening bell.
Any investor looking to trade after hours must use an ECN. ECNs are electronic networks that facilitate large-scale order buying. Most individual investors must be a client of a brokerage firm trading on an ECN. Examples of such brokerage firms include Ameritrade, Etrade, Fidelity and Schwab. Most of these companies operate from 7:30 to 8:00 in their respective time zones and cover some overseas markets.
To execute an after-hours trade, the investor will set a price he is willing to pay for a stock, bond or fund. However, the mere execution of an order does not guarantee that the order will be processed. Unlike regular hourly trading which fulfills market orders immediately, after-hours trading is a cross market. This means that the only way a purchase order will be fulfilled is if it can be matched to a sell order for the same stock and vice versa. The reason for this is because there are fewer people trading the after-hours market, and this results in fewer stocks, bonds, or funds being offered for trading.
People who trade after hours are paid the same amount in commissions as they would if they traded during business hours. Investors should be advised that stocks, bonds and mutual funds may trade to a greater or lesser extent than they would during normal trading hours because the market is smaller and therefore is subject to greater volatility. Also, fewer buyers and sellers in the market mean that an investor may not be able to secure a desired price for the stock, bond, or mutual fund.
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