How to Buy Stocks After They Close on Fridays

In the U.S. major stock markets are open on weekdays between 9:30 a.m. and 4 p.m. It is possible, however, to buy and sell stocks outside these hours. In fact, you can trade practically 24/7. These trades occur on electronic trading networks, or ECNs. Trades that take place after the major stock exchanges markets close are known as "after hours" or "extended hours" trades, and they are important to understand for any investor.

Step 1

Select a broker that offers after-hours trading and apply for an account. Before you can buy stocks, whether during regular or after hours, you must open a brokerage account. Only accredited brokers can execute stock trades, and such a broker must buy the stocks on your behalf. Practically all major brokerage houses offer extended hours trades and advertise this service on their websites. When in doubt, call your prospective broker and inquire about the availability of after-hour trades. Once you select a broker, print out the account application form from the broker's website or ask the broker to mail these to you. Since your signature is required to open an account, you must mail in the completed forms and cannot complete the process online.

Step 2

Transfer money or financial securities to fund the account. You can mail a check with your account application to fund your brokerage account or wait until you receive confirmation and an account number. Once the account is open, you can mail a check, execute a wire transfer or transfer financial securities, such as stocks or bonds, from a different brokerage account. When transferring assets from a different account, you must submit a form to the other broker before these transfers can occur. If you fund your account with cash, via a check or wire transfer, you are ready to purchase stocks as soon as the cash shows up in your account balance, which takes around two to five business days depending on the method of funding and the institutions involved. If you have funded your account with financial securities only, you need to sell them first and obtain cash from the sales proceeds before you can buy a stock after hours.

Step 3

Place an order for a stock trade. When you place your order to purchase a stock after the official close of the stock market on Friday at 4 p.m., the order will be automatically routed to an ECN. You do not need to take an extra step in the process. Some brokers may accept only a limit order after the close of the market. A limit order is one where you specify the maximum amount you are willing to pay for the stock, whereas a market order gives discretion to the broker to purchase at the prevailing market price. However, even if your broker does not mandate limit orders, it is a good idea to always place a cap on what you are willing to pay for the stock. Since fewer traders are active after hours, prices tend to swing more wildly after the official close of the stock market and limit orders reduce your risk.

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About the Author

Hunkar Ozyasar is the former high-yield bond strategist for Deutsche Bank. He has been quoted in publications including "Financial Times" and the "Wall Street Journal." His book, "When Time Management Fails," is published in 12 countries while Ozyasar’s finance articles are featured on Nikkei, Japan’s premier financial news service. He holds a Master of Business Administration from Kellogg Graduate School.

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