Making an after-hours trade is dependent on the desired exchange market a trader is seeking to use. The trading hours of the electronics communication network (ECN) used also influences off hours trading. Also, the success of an after-hours trade is contingent on whether the market is a crossing market.
There are several markets that can be used for an after-hours trade. The New York Stock Exchange (NYSE), the Nasdaq Stock Exchange, London Stock Exchange, Euronext, and Tokyo Stock Exchange are the five largest stock exchanges in the world that offer after-hours trading opportunities. An interested investor may begin trading on these exchanges within anywhere from 15 minutes to an hour after the closing bell, depending on the particular exchange. Typically, after-hours trading on these exchanges extends until the opening bell the next day.
Any investor seeking to make an after-hours trade must use an ECN. ECN’s are electronic networks that facilitate order purchases on a large scale. Most individual investors have to be a client of a brokerage firm that operates on an ECN. Examples of such brokerage firms include Ameritrade, Etrade, Fidelity, and Schwab. Most of these companies operate from 7:30 AM to 8:00 PM in their respective time zones and do cover some foreign markets.
To execute an after-hours trade, the investor will set a price he or she is willing to pay for a stock, bond, or fund. Merely making an order does not guarantee that the order will be fulfilled however. Unlike regular-hours trading that fulfill market orders immediately, after-hours trading is a crossing market. This means that the only way a purchase order will be satisfied is if it can be matched with an order to sell the same stock and vice versa. The reason for this is because there are less people trading on the after-hours market, and this results in a smaller supply of stocks, bonds, or funds for trading.
People conducting after-hours trading pay the same amount in commissions as they would if they make a business hours trade. Investors should be advised that stocks, bonds, and mutual funds might trade higher or lower than they would during regular trading hours because the market is smaller and therefore is subject to more volatility. Also, fewer buyers and sellers on the market means that an investor may not be able to secure the price desired for the stock, bond, or mutual fund.