What Is After Hours Trading?
When you talk to others about the stock market, you may find that some people are unaware of the vast potential there is to make money in it. The lack of knowledge regarding stock trading is because finding money making stocks can be very confusing, and time consuming. There are tricks that many learn at the beginning of their trading endeavor that always stick with them because they don’t have the time or inclination to learn more enhanced strategies or habits. But add after hours trading to the discussion of making money in the stock market and the conversation becomes more complicated, but the results can be more profitable.
You might mistakenly think of after hours trading as putting your order in to buy or sell stock after the market has closed and before it opens the next day, and then your transaction would be completed as soon as the market opens. But that is not after hours trading, that would really be putting in a very late or a very early one since nothing takes place overnight.
After hours trading really means stock shares and money is actually exchanged after hours. This used to be something that was only open to corporations or private entities that would be buying or selling large blocks of stock, but after hours trading is now something that almost anyone can do. However, it should be done with a great deal of caution.
For one thing after hours you cannot do all of the things you can normally do during the traditional hours of the stock market. For one thing the market is closed so there aren't as many players in it so trading volumes are lower which limits what takes place. You may only be able to enter a sell order to close a trading position, or only enter a buy order to open a new one. Round trips for the same stock usually isn't available. Also if you are trading overseas but just because the U.S. stock market is closed and you trade overseas that's not after market selling because those markets are just trading on their normal working hours.
Why Trade After Hours?
It's enticing to be able to take advantage of news that breaks after the market closes. Act soon enough and a buyer of stocks can benefit on a gap up in price at the market open by taking a position the night before if favorable overnight news about a particular stock brings tremendous interest in it. The next day. Reciprocally, it's advantageous to be able to get out of a stock after the market closes when bad news breaks. Using this strategy means paying close attention to market news all day every day.
If you really think that after hours trading is something that you should do, you do have to know what you can do and what you cannot. You should know exactly what you are doing and what to expect when you trade, and you may find that it is a bit more complicated and a bit more risky than you first thought. You should contact your broker about after hours trading to see what their policies are, and if it is something you can do or not. You may find that the best strategy for your particular portfolio is to keep on doing what you have been doing all along.