The advent of the Internet and electronic information exchanges has opened financial market trading to millions of investors throughout the world. Back in 1999, just as the dot-com craze was reaching a fever pitch, major U.S. stock market exchanges started introducing extended and after-market trading hours. Surprisingly, it hasn’t proven as popular as anticipated, but does still exist and could yet take off.

Theoretically, investors should be able to trade amongst each other at any hour of the day. Already, many electronic communication networks (ECN) and market exchanges outside of traditional exchanges (New York Stock Exchange, Nasdaq), let institutions place order interest and trading activity outside of regular trading hours. However, liquidity and the timely display of stock trading data outside of regular hours still remains an issue.

After-hour trading still exists because major market participants are free to exchange trading information whenever they wish and they are motivated to continue to encourage price discovery at any hour and across the globe. Large institutions and other investors will always continue to negotiate large share blocks at any hour of the day and across time zones. For these reasons, after-hours trading will likely continue to develop and improve.

One academic study estimated that information asymmetry, or the difference between informed and uninformed investors, is the greatest prior to when the stock market opens. From this perspective, information does take time to be disseminated and work its way through the market. For an information edge, certain investors may seek to trade outside of regular market hours to attempt to profit from this asymmetry.

The Bottom Line

After hours trading is more risky, but following vital data can make trading outside of regular trading a profitable endeavor for investors. It hasn’t developed as expected, but continues to improve over time.

At the time of writing Ryan C. Fuhrmann did not own shares in any of the companies mentioned in this article.

  1. What trends and data influence after-hours traders the most?

    Learn about the specific information that after-hours traders review to influence their trading. Read Answer >>
  2. What is after-hours trading? Am I able to trade at this time?

    After-hours trading (AHT) refers to the buying and selling of securities on major exchanges outside of specified regular ... Read Answer >>
  3. How can my stock's price change after hours, and what effect does this have on investors? ...

    Most investors know that the major stock exchanges have standard trading hours - set periods of time each day when trading ... Read Answer >>
  4. What are the main risks of after-hours trading?

    Trading outside of traditional stock market hours brings some unique risks that you should be aware of. Read Answer >>
  5. Why are the bid and ask quotes usually so far away from each other in after-hours ...

    After-hours trading is defined as the exchange of securities outside of an exchange's specified regular trading hours (usually ... Read Answer >>
  6. During what time does after-hours trading (AHT) occur?

    A lot of buying and selling can be done outside of the traditional trading hours. Find out when after-hours trading starts ... Read Answer >>
Related Articles
  1. Investing

    What's After-Hours Trading?

    After-hours trading occurs on major exchanges outside of regular trading hours, and takes place between 4:30 and 8 p.m. Eastern time.
  2. Trading

    What Is The Difference Between After-Hours Trading And Late Trading?

    “After-hours” trading and “late trading” both refer to investments made outside of normal business hours. While the two activities sound similar and often take place in similar time frames, the ...
  3. Trading

    Activities You Can Take Advantage Of In The Pre-Market And After-Hours Trading Sessions

    A great deal can happen in between the New York close of the market and the open the following morning. Learn how you can access opportunities and hedge against risk outside regular trading hours.
  4. Investing

    Can I Sell A Stock At The After-Hours Price?

    Most major exchanges trade from 9:30 am to 4 pm Eastern Standard Time, but you’re not limited to selling stock between those hours.
  5. Insights

    What's an Exchange?

    An exchange is an organized marketplace where securities and other financial instruments are traded.
  6. Trading

    Trading The Most Volatile Stocks After Hours

    The stock market has an official open and close, but trading takes place outside these hours, often in the most volatile stocks.
  7. Trading

    The Death Of The Trading Floor

    Electronic trading has almost completely replaced face-to-face human trading.
  8. Investing

    Who Owns The Stock Exchanges?

    As M&A heats up among the exchanges, here's how the market currently looks.
  9. Trading

    The Currency Market Information Edge

    Unique features of the forex market may allow larger players to get a jump on smaller ones.
  10. Investing

    What is the Stock Market?

    A stock market is where shares in corporations are issued and traded. Stock markets are key components of a free market economy.
  1. After-Hours Trading - AHT

    Trading after regular trading hours on the major exchanges. The ...
  2. After-Hours Market Close

    The last transaction and final price of a security that is traded ...
  3. Nasdaq-100 After Hours Indicator

    An indicator of post-market sentiment and trading activity, calculated ...
  4. Equity Market

    The market in which shares are issued and traded, either through ...
  5. Exchange

    A marketplace in which securities, commodities, derivatives and ...
  6. Extended Trading

    Trading conducted on electronic exchanges either after regular ...
Hot Definitions
  1. Subprime Auto Loan

    A type of auto loan approved for people with substandard credit scores or limited credit histories. There is no official ...
  2. Racketeering

    A fraudulent service built to serve a problem that wouldn't otherwise exist without the influence of the enterprise offering ...
  3. Federal Debt

    The total amount of money that the United States federal government owes to creditors. The government's creditors include ...
  4. Passive Management

    A style of management associated with mutual and exchange-traded funds (ETF) where a fund's portfolio mirrors a market index. ...
  5. Series 7

    A general securities registered representative license administered by the Financial Industry Regulatory Authority (FINRA) ...
  6. Compound Interest

    Compound Interest is interest calculated on the initial principal and also on the accumulated interest of previous periods ...
Trading Center