after-hours trading
After Hours Trading is the buying and selling of shares that happens after the official stock exchange has closed for the day.
In plain English
Think of the stock market like a popular market in Lagos that officially shuts its gates at 4pm, but a few traders stay back, phones in hand, still making deals with whoever wants to buy or sell before the next morning.
That is what after hours trading is. The regular exchange, whether it is the Nigerian Exchange or the London Stock Exchange, has set hours when most buying and selling happens, and prices are loud and public and easy to trust because so many people are involved.
Once those hours end, a smaller number of traders, often through electronic platforms, keep dealing based on news that just broke. A company might announce strong profits at 6pm, and instead of everyone waiting calmly till the next morning, some investors jump in right away to buy or sell at a price they agree on between themselves.
A Nigerian example would be a bank releasing surprise results after the Exchange closes, and a handful of institutional investors trading its shares informally before the next trading day opens. In the United Kingdom, a company like Tesco might issue a profit warning in the evening, and some funds react immediately through after hours platforms rather than waiting for the London Stock Exchange to reopen.
The catch is that fewer people are trading at this time, so prices can jump around more than they would during the day, and it is easier to buy or sell at a price that does not reflect what most of the market would agree is fair.
This is why many everyday investors leave after hours trading to the professionals, and simply wait for the market to open properly the next day.
A company announces excellent earnings at 7pm and its shares, which closed at ₦45 that day, trade at ₦52 in after hours dealing before most ordinary investors even hear the news.
Questions people ask
Can ordinary Nigerian investors take part in after hours trading?
It depends on your broker and the exchange rules, but generally after hours trading is limited and mostly used by larger institutional investors rather than everyday retail investors.
Is after hours trading riskier than normal trading?
Yes, because fewer people are trading at that time, prices can swing more sharply, and there is less certainty that the price you get truly reflects what the wider market thinks.
Why would a company's share price move so much after hours?
It usually happens because fresh news, such as earnings results or a major announcement, comes out after the market closes, and the few traders still active react to it immediately.
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