Risk Involved In Night Trading

Stock market trading tends to offer plenty of benefits to the aspiring trader. But being an investor in this highly volatile market, the person is likely to invest mostly during fixed times of the day, which is popularly called day trading, where most of the investors generally indulge in. Investors are also seen to trade after closing of the traditional market, which is called night trading.

Using Advanced Technology

With the advent of computers and latest technology and using ECMs or electronic communications network, the investors do find it very much easy towards routing orders to the trading account, for matching to the sellers and buyers after hours. After hour trading, being similar to that of the regular trading hours is called night trading. It is likely to have some limitations when compared to that of the traditional trading patterns. But the limitations noticed are much different from that of day time market.

How Orders are to be Placed in Night Time Trading?

The system of placing orders is quite the same like that of daytime trading, but coming with few differences. There is needed an account. The lowest brokerage India trading institute offering the account is to have various fee structures. When trading is concerned, majority of the brokers tend to offer only specific day orders that are valid for that particular day, along with night trading. In case, no buyers exist for matching the orders, then it would get automatically expired. Another series of orders are present that goes beyond similar day and are inclusive of after-hours trading. This can go well into next day. Hence, as an investor trying to search for orders that go beyond night trading, these are stated to be few of the aspects to look out for.

Be it night or day trading every segment of trade market is likely to offer its own benefits. However, for making most of the investment, it is necessary to understand the different risks involved. Risks in night trading are termed to be different.

Knowing the Risks

• Liquidity: It is considered to be a major risk involved in light trading. This particular section is said not to enjoy same market size and volume like that of day trading.
• Huge competitors: While getting engaged in night trading, the person is likely to face big institutions and organizations especially during after-hours. Such institutes do have the power and leverage for overcoming the small traders at the time of trading, for which he is to be prepared.
• Wide-spread: Due to the market’s low liquidity, the stock spread is likely to be wide ranged. As this occurs, having the stocks tracked is likely to be a tough job. Hence, it becomes crucial for the trader to know where to trade the stocks.
• Volatility: Due to widespread stocks and low liquidity, the trader is likely to face much volatile condition in the after-hours market. Hence, it is essential to be fully prepared to check the company news and earning announcements during odd hours.

Getting to know the above risks can help the trader to enjoy success in night time trading.