During the 1990s, many investors were unable to buy or sell different investments before the open and after the close of the markets. Investors then began demanding more choices, which led to rise of early morning and after hours trading.
Early Morning Trading Features
Early morning trading occurs when investors and traders are able to buy or sell various investments before the official open of the markets.
After Hours Features
After hours trading occurs when investors and traders are able to buy or sell different investments after the official close of the markets.
The biggest benefit for early morning and after hours trading is that investors can capitalize on news when it first comes out. When news is reported, there will be heavy volume that pushes prices up or down. Being able to buy or sell as this information is released means that the overall profits could be greater.
Both early morning and after hours trading offer a number of different risks; these include a lack of liquidity and large amounts of volatility.
Both early morning and after hours trading are becoming more popular. A good example can be seen with the NYSE Archipelago deal: this allowed traders around the world to trade NYSE-listed stocks electronically 24 hours a day.