Many investors are interested in after-hours trading due to its convenience, but there are some risks to be aware of. Therefore, you should educate yourself about both advantages and risks before you start trading.
After-hours markets tend to have less liquidity, lower volume, and more volatility compared to the usual scenario. It implies that there can be a significant effect on the price that investors get for their shares. In most cases, price changes during this period have the same impact on a share as the regular market`s changes. Thus, a two-dollar growth in the after-hours market happens to be the same as a two-dollar growth in the regular market.
Let`s assume that you obtain a stock that decreases from 11 dollars (the price that you paid) to 10 dollars in the course of the regular session, but then it increases by 2 dollars to trade at 12 dollars in the after-hours session. In this case, you should lose one dollar during the day session, but your per-share gain will be one dollar. These price changes turn out to be helpful when it comes to learning what the reaction of the market to new data will be. At the same time, these price fluctuations are more volatile than regular prices, so you should not rely on them. The reason is that the precise picture of things will be clear only when the regular session starts.
