After-hours trading used to exist only for large, institutional investors. In 1999 access to after-hours trading became available to individual investors. After-hours markets are similar to regular-hours markets, but their increased risks make them seldom utilized by retail or part-time investors. Many after-hours trading rules are set by individual brokerage firms, so check with your broker before trading after hours.

Hours

After-hours exchanges operate beyond the normal trading hours of 9:30 a.m. to 4 p.m. Eastern time.

Pre-Market Trading

The term "after-hours trading" is sometimes used to encompass trading before and after normal trading hours. Trading between 7:15 a.m. and 9:15 a.m. is considered pre-market trading.

Benefits

After-hours trading allows investors to capitalize on news that has the potential to trigger extreme volatility and is reported after the close of the regular market. These can include earnings reports, takeover attempts, or drug-test results.

Lack of Liquidity

Because of the relatively small amount of after-hours trading, selling shares of stock at the desired price might be difficult and thus might tie up capital, according to the Securities and Exchange Commission.

Other Risks

The SEC warns that the spread between the bid and ask prices, incomplete information, and competition with institutional investors with better information are a few of the risks of trading after hours. Carefully evaluate the risks versus the rewards.

Execution

After-hours trading is executed nearly the same as during normal trading hours. Some trading platforms allow only "limit orders," in which the buyer sets a maximum buy price or minimum sell price.

Source:

SEC Information on After Hours Trading Risks

After Hours Explanation

More Information:

After Hours Fact Sheet