Potential Risks of Extended Hours Trading
Because things do happen outside regular market hours that impact stock prices, extended hours trading can be an opportunity for investors to react more quickly to opportunities.
However, extended hours trading can also present some additional risks, including:
Liquidity – With fewer participants in the market after hours, there is a greater risk that your order will not be executed or that you will see larger price gaps than you might during regular hours.
News Announcements – Companies often wait to make major announcements, such as earnings, until after the regular market closes at 4 p.m. ET. These can greatly affect prices during extended hours.
Competition – Many participants in extended hours trading are professional investors working with large institutions. Institutional investors may have access to different or more current information than individual investors.