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The term "after-hours trading" describes the purchase and sale of shares outside of the stock exchange's usual trading hours. In the United States, regular market hours are from 9:30 am to 4:00 pm Eastern Standard Time (EST). Trading after hours normally takes place between 4:00 PM and 8:00 PM EST.
Investors can trade assets after usual market hours, giving them more flexibility and potentially getting better prices. It also comes with a number of problems, including as decreased liquidity, greater bid-ask gaps, and elevated market risk.
The supply and demand for assets determine prices in after-hours trading, just like they do during regular market hours. Lower trading volumes, however, might lead to more erratic pricing and less precise price quotes from market makers. Investors should therefore be aware of these difficulties and proceed with after-hours trading with caution.
Price determination in after-hours trading follows the same rules as during regular market hours: supply and demand for assets. Though prices may be more erratic and market makers' quotes of prices may not be as precise when trading volumes are smaller. Investors must therefore be aware of these difficulties and proceed with prudence while engaging in after-hours trading.
