HOW WILL AFTER-HOURS TRADING AFFECT YOU? (FINANCIAL FOCUS)

This "Financial Focus" column is prepared by Edward Jones Investments, headquartered in St. Louis. Jones includes branches throughout the nation, including Cape Girardeau and Jackson.

Online brokerages have it. The Chicago Stock Exchange has it. And, before too long, the New York Stock Exchange may have it. What is "it"? It's after-hours trading. And it soon may be so prevalent that the term "after hours" may become meaningless.

However, that's not the case yet -- and if you're interested in after-hours trading, you should be aware that there are some real differences between after-hours trades and those made during "normal" business hours.

One of these differences has to do with the pricing of any given stock. During regular trading, you can place a "market" order to buy or sell a stock at the stock's current price. You won't have to wonder if the price will change before your trade is executed, what you see is what you'll get. But here is no standard price quote on stocks trading after 4 p.m. Eastern time, so all after-hours trades are "limit" orders.

What does that mean? It means you place an order, you must set a price "ceiling" when you want to buy, or a "floor" when you want to sell. In other words, you must decide what price range you will not exceed when you make a trade. That's a different kind of concept for most people used to simply buying and selling stocks at the available price. And it means you'll have to make a judgment call on what you're willing to pay or be paid for a stock.

That's not to say that "limit" orders are, by themselves, a problem. In one sense, limit orders may be beneficial, because they can protect you against wild price swings. On the other hand, after-hours trading volume is still relatively low, so you may not find any takers for your limit orders.

You also may find other risks in after-hours trading. For one thing, price movements during extended hours may be more volatile than those during trading sessions. And the impact of news announcements immediately preceding, or during, after-hours sessions may cause an exaggerated effect on the market, because the volume of trades is so much lower than it is during the regular trading day. It's a good idea to read the day's news on the stock you're trading, especially any announcements that come after regular trading hours. If your stock is moving rapidly up or down, and you want to hold your order until you determine what's behind the stock's momentum.

Is after-hours trading worth it to you? You'll have to decide that for yourself. Generally speaking, though, there shouldn't be a lot of times where you absolutely must make a trade. Snap judgments and tips on "hot" stocks may be the stuff of high drama, but most people can do without them. The truth is that you have time enough to build and execute a solid investment plan during normal trading hours.

The Southeast Missourian does not recommend that readers buy or sell stocks featured in this column, which is provided for informational purposes only.