After-hours trading is the period of time after the market closes when an investor can buy and sell securities outside of regular trading hours. Both the New York Stock Exchange and the Nasdaq Stock Market normally operate from 9:30 a.m. to 4:00 p.m. Eastern Time. However, trades during the after-hours session can be completed through electronic exchanges anytime between 4:00 p.m. and 8:00 p.m. Eastern Time. These electronic communication networks (ECNs) match potential buyers and sellers without using a traditional stock exchange. 

Who Can Trade During the After-Hours Session?

After-hours trading was used primarily by institutional investors up until the 1990s when ECNs became more widely available. An ECN not only allows individual investors to interact electronically but also lets large institutional investors interact anonymously, thereby hiding their actions.

As extended trading has become increasingly popular over the past decade, investors have embraced, and a number of brokers now offer after-hours trading, including Charles Schwab, Fidelity, and TD Ameritrade. Check out Investopedia's list of the best stock brokers for day trading.

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What's After-Hours Trading?

Risks and Dangers

The development of after-hours trading offers investors the possibility of great gains, but you should also be aware of some of its inherent risks and dangers:

  • Less liquidity: There are far more buyers and sellers during regular hours. During after-hours trading, there may be less trading volume for your stock, and it may be harder to convert shares to cash.
  • Wide spreads: A lower volume in trading may result in a wide spread between bid and ask prices. Therefore, it may be hard for an individual to have his or her order executed at a favorable price.
  • Tough competition for individual investors: While individual investors now have the opportunity to trade in an after-hours market, the reality is that they must compete against large institutional investors that have access to more resources than the average individual investor.
  • Volatility: The after-hours market is thinly traded in comparison to regular-hours trading. Therefore, you are more likely to experience severe price fluctuations in after-hours trading than trading during regular hours.

Here's an example of some of the risks associated with after-hours trading:

An investor who would like to sell her shares of Goldman Sachs (GS) for $250.00 in the session after the regular markets have closed. Due to the highly illiquid nature of the after-hours market, the highest bid price from the sparse number of buyers is $240.00. She can either change her limit price to $240.00 to sell right away or she can keep her original price and run the risk of a partial order or a "not-filled" order. At the end of the trading session at 8:00 p.m., all orders that were not executed will be canceled.

Benefits

After-hours trading comes with a number of risks, but there are some possible benefits too:

  • Trading on fresh information: Having the ability to trade after the normal markets are closed allows you to react quickly to breaking news stories or fresh information before the next day's market open.
  • Pricing opportunities: Although volatility is a risk associated with trading after hours, you may find some appealing prices during this time.
  • Convenience: Investors may prefer trading at off-peak times, and after-hours trading provides this added flexibility. 

Market Hours Schedule

New York Stock Exchange

  • Standard Trading: Monday through Friday 9:30 a.m. through 4:00 p.m. ET
  • After-Hours Trading: Monday through Friday 4:00 p.m. through 8:00 p.m. ET
  • Pre-Market Trading: Monday through Friday 7:00 a.m. through 9:30 a.m. ET

NASDAQ Stock Exchange

  • Standard Trading: Monday through Friday 9:30 a.m. through 4:00 p.m. ET
  • After-Hours Trading: Monday through Friday 4:00 p.m. through 8:00 p.m. ET
  • Pre-Market Trading: Monday through Friday 4:00 a.m. through 9:30 a.m. ET

U.S. Stock Exchange Holidays

U.S. markets are closed on the following days:

  • New Year’s Day
  • Martin Luther King Jr. Day
  • President’s Day
  • Good Friday
  • Memorial Day
  • Independence Day
  • Labor Day
  • Thanksgiving Day
  • Christmas Day

U.S. Stock Exchange Shortened Trading Days

On the following days, the U.S. stock exchanges have shortened trading days and close early:

  • Day prior to 4th of July: 9:30 a.m. through 1:00 p.m. ET
  • Black Friday (the day after Thanksgiving): 9:30 a.m. through 1:00 p.m. ET
  • Christmas Eve: 9:30 a.m. through 1:00 p.m. ET