After-Hours Trading (AHT)
What is after-hours trading?
When you see someone ringing the opening or closing bell on the New York Stock Exchange, it's easy to imagine that markets have fixed trading hours. New York, for example, officially trades from 9.30am to 4pm Eastern Time.
But in fact it's more and more common for big investors and individuals to continue trading securities after hours. Trading around the clock has been made possible by electronic communication networks, which mean direct trading can be done digitally – and even anonymously – without brokers.
Where have you heard about after-hours trading?
AHT will often come into play when a stock price opens higher or lower than it closed the previous day, perhaps because of a significant economic development or corporate announcement that's happened outside trading hours.
What you need to know about after-hours trading...
Investors can use AHT to respond promptly to news stories that break overnight, without having to wait for exchanges to re-open. It's also great for people who don't have time to trade during the day.
However, after-hours trading has some drawbacks, including a lack of liquidity and greater volatility compared to normal day trading. You will probably find fewer trades and traders around out of hours, and solid or realistic pricing may be harder to find.