Posted on 22 July 2012.
If you are new to investing, you have probably wondered what is after market trading. Perhaps you have heard about the practice, but you have not received an adequate definition. After market trading may sound mysterious, but the concept is actually quite basic. After market trading refers to trades that occur after the hours during which the major exchanges are open. For example, trading done in the United States normally occurs between the hours of 9:30 a.m. and 4:00 p.m. Eastern Time. After market trading, by definition, happens after the markets have closed at 4:00 p.m., and it continues until 8:00 p.m. on days with normal sessions.
After market trading has existed for some time, but it was not known for high volume trading until recently. Previously, the practice had been reserved for large institutions that could benefit from unorthodox trading practices. With advances in consumer technology, individuals have become better equipped to engage in after market trading, and this has caused the increase in the practice’s popularity as retail traders have become accustomed to using electronic communication networks to handle transactions. Although some stock market experts frown upon the concept of trading after hours, many investors benefit from the convenience associated with trading after the traditional markets have closed.
Now that you know what is after market trading, you may be curious why the concept is important. Although a number of investors hold the belief that trading after hours offers no benefits, others find that the practice helps them to act quickly when breaking news or international developments are likely to affect trading. The major exchanges are only open for brief windows during each day, and the practice of trading after hours allows investors to extend the hours of trading so that they can take advantage of opportunities quickly and efficiently. This is why it is so important to learn what is after market trading.
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