After Hours Stocks, What is the Evening Market and How Does it Work?

Stock exchange after hours: how it works? Want to know what it is and above all how to do stock trading without waiting for the markets to open?

If you find yourself in this situation then you are in the right place because today we will try to understand together the characteristics of this market, the advantages and disadvantages and above all the precautions that must be taken if you intend to trade outside normal trading hours.

Trading After Hours: cos’è

Let’s start by explaining in detail what we mean by after hours.

This type of market was introduced way back in 1999, following the implementation of a process of incorporation of electronic communications and networks into the stock market.

Con trading after hours we are referring to the trading that takes place on the shares after the regular closure of the financial markets.

We can say that at the beginning this special type of trading referred only to investments with a high amount, for example mutual funds or institutional investments.

After some time and nowadays, individual investors can also participate.

Trade before the open (premarket, which we will see immediately after) or after the closure of a market allows the investor to be able to seize different opportunities, precisely because they are outside the normal trading hours of the market.

Trading outside normal trading hours allows you to take advantage of opportunity who show up during other times; for example you will be able to make more use of the volatility which follows the quarterly results of American companies, or you can take advantage of news flashes or company announcements, which may not always happen when the market is open.

The importance of the After Hours

As I was hinting to you, theimportanza del trading after hours lies mainly in the possibility of trading during the quarterly announcements of the companies, since many American companies release this information right outside the normal trading hours of the stock market, and therefore if you have the possibility to trade with extended hours, you could catch of opportunities and an interesting volatility precisely in relation to these events.

And advantage not to be underestimated is also what, since it is a evening marketin that instant you could be in possession of important information, such as for example company financial statements published when the Stock Exchange is closed, which also allow you to make more informed decisions and above all to make different forecasts from those who instead operate only with open bags.

You could therefore have an advantage, given that you would be able to make predictions on stocks, dictated by the influence of some news in your possession.

Furthermore, often when the markets are closed, interesting prices are generated: this allows you to buy a security at prices that could be very advantageous for you.

Disadvantages of the after hours market

In addition to the advantages and opportunities offered by this type of market, the other side of the coin must always be considered, i.e. one must pay attention to how one approaches these markets, because it could be easy to run into errors or difficult situations that could jeopardize your capital and lead you to even substantial losses.

A disadvantage could be that related to the less liquiditydue to the absence of investors, and which then also affects the volatility of the share price.

So it is a risky marketnot to be underestimated, and which is usually recommended to expert traders and investors, who have already accumulated experience in the investment field.

There is also a premarket

In addition to the after hours market, there is another particular type of market, namely the premarket.

This is the possibility of trading before the opening of the regular markets: for example in the United States it takes place from 7 to 9 in the morning (New York time).

This activity is often used by active traders who place buy or sell orders before the actual trading begins, and therefore before the regular markets open.

Investors often take advantage of the premarket for move up any immediate news which could then have a significant response to the opening of the markets.

It is also important to know that the pre-market trading hours they vary on the basis of the Stock Exchange and also on the time zone.

Beware of the OTC market

There is often confusion between the after hours market and mercato over-the-counter (OTC).

Il OTC market it is a stock market where different financial instruments are negotiated, such as for example shares, bonds, currencies, etc… directly between the two parties, using OTC contracts.

However, this market does not possess the requisites recognized by regulated markets, and therefore the trading of products takes place outside the official circuits.

For example, an OTC contract can be concluded between an investment bank and a client, usually with a company that needs to have financing.

Obviously an OTC market has some higher risks compared to traditional markets which are regulated, since in addition to market risk it is also necessary to consider counterparty risk, which will be higher than in traditional regulated markets.

Conclusions

We have seen what the after hours market is, what are its advantages and disadvantages.

As I said before, it is good to remember that it is a risky market, recommended only to experienced traders and investors who really know what they are doing, and above all who have already accumulated experience in the world of investments.

This is because the investor must be ready to suffer lossesto bear the volatility and above all he must be aware of what he is doing.

Fare trading in fact it is already a complicated operation, and doing it during the closing of the markets could add further difficulties.

Before saying goodbye, I would like to leave you some guides that could be useful for you to start your investment journey:

See you soon!