This new century has  ushered in many positive changes to American Society including the  first African American President, a financial crisis, the iPod and iPhone and stock trading after hours for the masses.  The New York Stock Exchange and NASDAQ – both the most active markets in the US Today – have historically been open for business between 9:30AM – 4:00PM EST, Monday thru Friday and trading after hours was traditionally restricted to high net worth individuals and institutional investors (really rich people).

ECNs or Electronic Communications Networks allow smaller exchanges and everyday individual investors to gain access to the after hours market.  But while the markets have opened up to everyone that does not mean that the risks associated with these volatile and comparatively thinly traded markets have evaporated.  Before you start after hour stock trading, you need to become familiar with the differences between trading during normal market hours and trading after hours.  Most brokerages and online stock trading companies have readily available disclosure information for you to review but here are some bullets points of what you need to look out for.

 

• Limited Quote Visibility – not all firms quotes systems allow you to see all the  quotes on a particular stock.  So you could be trading with less than complete information if your brokerage firm does not provide complete quote systems.
• Lack of Liquidity – trading after hours is  limited so there are less buyers and sellers which  limits your ability to get your trades executed as a set price.
• Larger Spreads – with less trading volume, less buyers and sellers come larger spreads between bid and ask
• Price Volatility – liquidity, spreads and volatility are due to lower activity and less buyers and sellers.

StarReviews Top 3 Stock Trading Websites

1) Zecco Trading

2) eTrade Financial

3) TD Ameritrade

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Other issues that can affect your ability to trade profitably after hours are uncertain prices, a bias toward limit orders, direct competition with professional and institutional traders and computer delays.  So while this decade has ushered in many positive changes some have not come without their own risks.  While an iPod and  iPhone are relatively safe, stock trading after hours can have some inherent risks that you need to understand before you start.

Tags: stock trading