After Hours Trading
What it is:
How it works (Example):
In the United States, pre-market trading occurs between 8:00 a.m. and 9:30 a.m. Eastern Standard Time (EST), and after hours trading typically occurs between 4:00 p.m. and 6:30 p.m. EST. After hours trading is usually abbreviated with the acronym AH.
Until recently, after hours trading volume has been relatively low -- generally reserved for institutional investors with the confidence to partake in unconventional trading methods. However, the volume of after hours trading has risen in recent years as retail investors become more familiar with the concept of trading over an electronic communication network (ECN), which is how after hours trading takes place.
ECNs connect buyers and sellers over a network, eliminating the need for an intermediary such as a broker or investment bank. The Nasdaq market is an example of an ECN. Rather than a physical location such as the New York Stock Exchange, the Nasdaq is a network of securities traders who engage and trade directly with one another.
Why it Matters:
However, after hours trading can also be subject to the whims of less-seasoned investors. Consequently, veterans on Wall Street sometimes deride after hours trading as "amateur hour."