Whenever it was introduced around the turn of the century, after hours Stock trading was going to make Wall Street the street that never sleeps. It certainly has helped in some cases, being able to trade after Wall Street actually closes but is it really something that has caught on? What are the benefits of after hours Stock trading and how can you take advantage of this relatively new system?
After hours Stock trading seems like something that was really a good idea when it first came out, however, it never really caught on like it was predicted. In fact, only about 1% of all of the trading activity that goes on during the day on Wall Street is actually part of the after-hours trading. This doesn’t mean that it is a bad idea to take advantage of this, especially if you are familiar with the system. Many people prefer to only do their business, however, during the day and this also adds to the lack of interest in after hours Stock trading.
The first thing that you need to be familiar with is the fact that each individual broker will have his own services that they offer for after hours Stock trading. They may also try to steer you away from doing this all together, especially because stocks tend to be volatile on a daily basis and can change by the time the stock market actually opens in the morning. Here are some of the risks that are associated with this type of trading.
One of the first things that you will notice with this type of trading is that you cannot see all of the quotes that are available. In fact, depending on your brokerage firms system, you may only have access to a particular quote on your stock. You may also not be able to trade as freely in the after hour market because there are not as many people available to trade stocks at that time.
What this basically means is that you do not have the liquidity that is available during regular Wall Street hours.
Some of the other problems with after hour stock trading includes a variation in quotes, limited trading activity, overreaction to sensational news stories and delays in having your stock orders executed. For these reasons, many people have decided to steer clear of trading stocks after hours and only go with the standard trading times in which Wall Street is open. Does this mean that it is always a bad idea to trade stocks after hours?
Nothing could be further from the truth. There are times in which news stories and other items make it favourable for a large number of trades to happen after hours. When this is the case, a lot of activity can actually occur after Wall Street is closed for the night. As with most things in Stock trading, it all has to do with timing. If you time your after-hours trading properly, you can certainly walk away from the table a winner.