How Can I Buy or Sell Stocks After Hours?

After-hours trading occurs when investors trade stocks and bonds on the market after the normal business hours of 9:30 am to 4:00 pm Eastern Time. Until recently, after-market trading was limited to only large trading and reserved for only professionals and certain companies, with individual investors unable to trade after hours. Now, however, trading after-hours can be done by anyone.

Buying or selling stocks after hours comes with a variety of risks and is not recommended for investing amateurs. In addition to the fact that the opening price can differ from the closing of a stock as a result, trading after-hours means higher costs of stocks, limited access to stocks, and the possibility of technical difficulties since after-hours trading must be done online.

Some believe that they might get better stock prices with after-hour trading; however, this is not usually the case. A number of factors, including lack of liquidity, which is the ability to convert stock into cash, and price swings can contribute to a stock's higher price during the after-market trading period.
However, if this doesn't deter you, you can still buy and sell stocks after-hours, although the process is a little different. First of all, you need to have a broker who allows after-market trading, so if you intend on doing after-hours buying and selling, make sure you're clear on where your broker stands.

In order to trade after market, one must have access to an electronic communication network, or ECN. These ECNs operate after hours and are affiliated with online brokerage firms, such as etrade or scottrade. They go by their own rules with regards to what you can and can't sell and when, so it's best to be certain before investing in an account.

Many ECNs only accept limit orders for after hours trading, which means the investor specifies a certain price and if a match is found, the ECN sells or buys the stock. This is generally safer than market orders, which allow you to just indicate that you want to buy or sell a stock without placing limits on it.

Once you have your broker and are familiar with the terms, you can begin trading after hours. You place your limit order, and if the ECN can match it with another investor, then the trade takes place. In the event a match cannot be found, then the trade is put on the ECN limit order book. Sometimes, other markets participate in after-hours trading, and your limit order can't be matched, the order will be routed to another market.

If your ENC allows market orders, it's still a good idea to place limit orders because of the risks that after-hours trading involves. For example, some ENCs don't allow investors to see the full market activity when you place your order; instead, they limit it to only those stocks on the ENC in which you are participating.

These are just a few things to consider before you start trading online. In addition, you will want to fully explore the risks associated with trading after-market. Once you have consulted your broker and done your research, then you can decide if buying and trading after-hours can be beneficial to you.