After Hours Stock Market:
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In 1999, the individual investors’ plea for equal after hours stock market trading access was finally granted. Investors can now do their trading at any time, as long as they are a customer of a brokerage firm with an ECN of its own, or access to one or more of the current nine ECNs: Instinet, Island, Bloomberg Tradebook, Archipelago, REDIBook, Strike, Attain, NexTrade, Market XT, and GFI Securities.
Selecting an after hours stock broker: Check to see whether your broker’s system will permit access to quotes on other ECNs and if it will route your order for execution to other ECNs. If you are limited to stock trading quotes within only one system, you may be unable to complete a trade with a willing investor on a different ECN.
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Here are a few good brokers:
* Harris Direct (Redibook)
* Charles Schwab(Redibook)
* Ameritrade (Island)
* ETrade (Archipelago)
After selecting your broker, there are two after hours essentials to brush up on and/or learn:
Limit orders in allow you to set the high/low boundaries for your stock trading, which can protect you from higher priced buys or lower priced sells. Be aware, however, that due to sparse trading occurring in the after hours stock market, there’s a high probability that your buy or sell orders won’t be picked up before the session’s close.
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The after hours trading order book is a record of all orders currently pending on a given stock. It pairs buyers with sellers when their bid and ask prices match up. Use the book to judge the depth of the market in a particular stock before you place your stock market order and then use the book to track its status.
After hours stock market trading can be like
walking the tightrope without a net!
While later hours can present investing opportunities for the experienced investor, it has its risks:
Liquidity - With fewer traders in the marketplace, stocks have less "liquidity," which can mean wildly swinging prices and larger spreads between bids and ask prices.
Reporting Structure - Unlike NASDAQ and NYSE, the prices and volumes on one ECN might be different from those on another.
Price Volatility - Stocks with limited trading activity can experience wilder price fluctuations than during regular trading hours. Late breaking news after hours can have your head spinning when requesting a stock trading quote. Read more info on what makes stock prices rise and fall here.
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Limit Orders Caveat - Many after hours trading ECNs only accept limit orders. If the market shifts away from your high/low bid/ask price, your order will not be executed. Find out whether non-executed after hours orders will be cancelled or automatically entered when regular trading hours begin. Conversely, check whether an order placed during regular hours will carry over to the after hours market.
Computer Delays – Just like regular online trading, computer delays or failures will impact the execution of your bid/ask, cancel or change orders.
Competition - After hours investors are competing with large institution professionals, such as mutual funds, who may have access to more ECNs and superior information than the individual investors.
To sum up, after hours stock market trading media driven and thinly populated by investors looking for bargains following late press releases by public companies or other breaking news after the market close. You need to choose a compatible broker, and then weigh the risks versus the possible rewards.
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