After-hours trading is a type of stock trading that occurs either before or after the regular trading hours of a stock exchange. It is also known as extended-hours trading and can be divided into two categories: pre-market trading and after-hours trading. Pre-market trading occurs from 4:00 a.m. to 9:30 a.m. Eastern Time (ET), while after-hours trading occurs from 4:00 p.m. to 8:00 p.m. ET. During these periods, investors can buy and sell securities outside of normal trading hours.
After-hours trading is conducted through electronic communication networks (ECNs) . These private trading systems allow individual investors to participate in after-hours trading, which used to be limited to high-net-worth investors and institutional investors like mutual funds. However, market makers and specialists generally do not participate in after-hours trading, which can limit liquidity.
After-hours trading is more volatile and riskier than trading during regular hours because of fewer participants. As a result, trading volumes and liquidity may be far lower than during regular hours. After-hours trading can be convenient because it allows investors to invest when the market isnt open, but the lower volume of trading also creates pitfalls such as higher volatility.
In summary, after-hours trading is a type of stock trading that occurs outside of regular trading hours. It is conducted through electronic communication networks and can be more volatile and riskier than trading during regular hours.
