After-hours trading, sometimes called extended trading, is trading undertaken on electronic market exchanges either before or after regular trading hours.
In the United States, pre-market trading occurs between 8:00 a.m. and 9:30 a.m. Eastern Time (ET), and after-hours trading typically occurs between 4:00 p.m. and 6:30 p.m. ET. After-hours trading is usually abbreviated on message boards with the acronym AH.
Until recently, after-hours trading volume was relatively low. However, the volume of extended trading has exploded, as online trading and related computer technologies have become more prevalent and the markets have grown more international.
Once the preserve of big institutional investors who had the confidence to deploy unorthodox methods, after-hours trading is increasingly being adopted by retail investors, who are becoming more comfortable with the interconnected electronic communications networks that make it possible to trade at unconventional hours. Online trading is less of a novelty and more commonplace, removing the mystique of after-hours trading.
After-hours trading allows nimble investors to act quickly to major events that are investment "catalysts," such as sudden corporate misfortune, political turmoil overseas, terrorist attacks, etc.
Trading before or after the markets officially open allows instantaneous investment decisions that are pegged to the latest developments. A caveat is that after-hours trading can be subject to the emotional whims and fears of less-seasoned, smaller investors—consequently, veteran pros on Wall Street sometimes derisively refer to after-hours trading as "amateur hour," a play on the AH acronym.