After‑Hours Trading
What It Is
After‑hours trading occurs outside regular market hours through electronic communication networks (ECNs).
Why It Matters
It allows investors to react to earnings releases, news events, and global developments when markets are closed.
How It Works
- Trades occur electronically
- Liquidity is lower than regular hours
- Spreads are wider
- Prices can be more volatile
Key Components
- ECNs
- Extended trading sessions
- Liquidity constraints
- Volatility risks
Example
Earnings announcements released after the close often cause significant price movements in after‑hours trading.
Key Takeaways
- After‑hours trading offers flexibility.
- It carries higher risk due to low liquidity.
- Prices may differ significantly from the next day’s open.