After-hours trading depends on the desired foreign exchange market and the electronic communication network (ECN) business hours. The NYSE, Nasdaq, London Stock Exchange, Euronext, and Tokyo Stock Exchange offer after-hours trading opportunities. Investors must use an ECN to trade outside business hours, and orders may not be fulfilled due to lower supply and higher volatility.
Making a trade after hours depends on the desired foreign exchange market that a trader is looking to use. The electronic communication network (ECN) business 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 after-hours trading. The New York Stock Exchange (NYSE), the Nasdaq Stock Exchange, the London Stock Exchange, Euronext, and the Tokyo Stock Exchange are the five largest stock exchanges in the world that offer after-hours trading opportunities. An interested investor can start trading these exchanges anywhere from 15 minutes to an hour after the closing bell, depending on the particular exchange. Typically, after-hours trading on these exchanges extends until the opening bell the next day.
Any investor wishing to place a trade outside business hours must use an ECN. ECNs are electronic networks that facilitate the buying of orders on a large scale. Most individual investors must be clients of a brokerage firm that trades on an ECN. Examples of such brokerage firms include Ameritrade, Etrade, Fidelity, and Schwab. Most of these companies operate from 7:30 am to 8:00 pm in their respective time zones and cover some foreign markets.
To execute an after-hours trade, an investor will set a price that he or she is willing to pay for a stock, bond, or fund. However, the mere fact of placing an order does not guarantee that it will be fulfilled. Unlike regular hours trading which meets market orders immediately, after hours trading is a cross market. This means that the only way a buy order will be fulfilled is if it can be combined with an order to sell the same stock and vice versa. The reason for this is because there are fewer people trading the market after hours, and this results in a lower supply of stocks, bonds or funds for trading.
People who trade after hours pay 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 higher or lower than they would during regular trading hours because the market is smaller and therefore subject to a higher volatility. Additionally, fewer buyers and sellers in the market means that an investor may not be able to lock in the desired price for stocks, bonds, or mutual funds.
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