Introduction
When the stock market closes, most people assume that trading activity comes to a halt until it opens again the next day. However, this is not entirely true. There is an after-hours market where trading can still occur. In this article, we will discuss who trades after hours and why they do it.
What is After-Hours Trading?
After-hours trading refers to the buying and selling of stocks outside of regular trading hours. These hours typically run from 9:30 a.m. to 4:00 p.m. Eastern Standard Time. After-hours trading takes place from 4:00 p.m. to 8:00 p.m. Eastern Standard Time.
Who Trades After Hours?
After-hours trading is typically conducted by institutional investors and high net worth individuals. These individuals have access to more resources and information which allows them to make informed decisions about trading after hours. Retail investors can also participate in after-hours trading but are limited in their ability to do so.
Why Do People Trade After Hours?
There are a few reasons why people trade after hours. One reason is that after-hours trading allows investors to react to news that is released after the market closes. This can be particularly important for companies that release earnings reports after the market closes. Another reason why people trade after hours is that they can take advantage of market movements that occur after the market closes. For example, if a stock has a significant price movement after the market closes, investors can take advantage of this movement by buying or selling shares during after-hours trading.
The Risks of After-Hours Trading
While after-hours trading can be beneficial, it also comes with risks. Because after-hours trading has lower trading volumes, it can be more volatile than regular trading hours. Additionally, there may be a wider bid-ask spread during after-hours trading which can lead to higher transaction costs.
Conclusion
In conclusion, after-hours trading is a way for investors to buy and sell stocks outside of regular trading hours. Institutional investors and high net worth individuals typically engage in after-hours trading, but retail investors can also participate. While after-hours trading can be beneficial, it also comes with risks that investors should be aware of.
