After Hours Stock Trading: How the "late" bird can get the worm

After Hours Stock Trading:
Are your profits closed for business?

After hours stock trading can be a goldmine if you have the right tools and knowledge of the terrain. Breaking news nuggets are all around if you

are prepared to see them. In this article, we give you tips, terms, and techniques to trade your way to top profits.

In 1999, the individual investors’ plea for equal after hours trading access was finally granted. Investors can now do their stock market 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 Trading 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.

Listed below are a few good ECN 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 the sparsely populated after hours trading market, there’s a high probability that your buy or sell orders won’t be picked up before the session’s close.

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 trading order and then use the book to track your order's status.

After hours stock trading can be like
walking the tightrope without a net!

While after hours trading can present investing opportunities for the experienced investor, it has its risks:

Liquidity - With fewer investors 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 have your head spinning when requesting a stock trading quote.

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 after hours trading.

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 trading is a media driven market, 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. After hours stock trading should be viewed as an arena for only the most experienced investor.

ADD TO YOUR SOCIAL BOOKMARKS: