What is After Market Trading?

After market trading occurs on an electronic market exchange after regular trading hours have ended.

How Does After Market Trading Work?

In the United States, after market trading typically occurs between 4:00 p.m. and 6:30 p.m. Eastern Standard Time (EST).

Until recently, after market trading volume was relatively low. It was typically the realm of large institutions with the confidence to partake in unorthodox trading methods. However, the volume of after markets trading has increased in recent years as retail investors become more comfortable with trading over an electronic communication network (ECN), which is how after market trading must take 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 (NYSE), the Nasdaq is a network of securities traders who engage and trade directly with one another.

Why Does After Market Trading Matter?

After market trading allows investors to act quickly to major events that can be an investment catalyst, such as sudden corporate misfortune, political turmoil overseas, late-breaking news, etc.

However, after market trading can be subject to the emotional whims and fears of less-experienced investors. Consequently, Wall Street veterans sometimes refer to after market trading as 'amateur hour.'