What is After-Hours Trading?

After-hours trading, sometimes known as extended trading, is trading undertaken on the electronic market exchanges either before or after regular trading hours.

In the United States, pre-market trading occurs between 8:00 a.m. and 9:30 a.m. Eastern Time (ET), and after-hours trading typically occurs between 4:00 p.m. and 6:30 p.m. ET. Trading that happens during these hours is usually abbreviated on message boards with the acronym AH.

Until recently, trading volume during these early and late hours was relatively low. However, the volume of extended trading has exploded recently, as online trading and related computer technologies have become more prevalent and the markets have grown more international. Once the preserve of big institutional investors who had the confidence to deploy unorthodox methods, after-hours trading is increasingly being adopted by retail investors, who are becoming more comfortable with the interconnected electronic communications networks that make it possible to trade during these unconventional hours. Online trading is less of a novelty and more commonplace, removing much of the mystique of after-hours trading.

Additionally, these extended trading hours allow nimble investors to act quickly to major events that are investment “catalysts,” such as sudden corporate misfortune, political turmoil overseas, terrorist attacks, etc. Trading before or after the markets officially open allows instantaneous investment decisions that are pegged to the latest developments. A caveat is that after-hours trading can be subject to the emotional whims and fears of less-seasoned, smaller investors—consequently, veteran pros on Wall Street sometimes derisively refer to after-hours trading as “amateur hour,” a play on the AH acronym.

To learn more about stocks and investing, download our FREE report, How to Invest in Stocks and Other Investing Basics, today. You’ll learn about the four types of stocks, what it takes to be a successful investor, and you’ll discover five reasons you should skip the broker and invest on your own.