One of the great new conveniences for individual stock traders is the new, so-called "24/7 trading option" being offered by some platforms such as Robin Hood and Interactive Brokers, but there are a couple of downsides that may make you think twice about participating, at least right now.
Individual investors trading in the overnight hours may be unique, but Certified Financial Planner Bill Dendy, CPA, says it's just a matter of time before its popularity increases.
"They've already had extended-hour trading starting as early as 4 in the morning and going as late as 8 pm at night, but this is a 24-hour concept and it's not just any stock at the moment, but the idea is providing people with the ability to trade anytime they want.
"That's a positive if there's an overnight event that you'd like to take advantage of, either with a buy or a sell.
"However, there are some negatives to overnight trading in that the volumes aren't really high volumes so the spreads between the bids and the asks on the stocks can be a little wider, so they have wider swings based on news or any other information."
To explain, he added, "The markets work most efficiently when there are a lot of people wanting to sell at the same time -- when you have a lot of people wanting to buy, you get the highest price anyone's willing to pay for a stock, and when a lot of people want to sell, want to sell you're going to get the lowest price anyone's willing to accept for a stock.
"That allows you to have very narrow spreads between what you can sell it for and what you can buy it for.
"But where there are fewer people in the market, you have wider spreads, so instead of it being just a few pennies it can be a dollar or more, so it depends on the stock.
"Now so far they are allowing the 24-hour trading with the larger, more popular companies, so the spreads have not fallen to that great a degree, but that's one of the challenges when doing overnight or 24-hour trading."
Therefore, you may not get the best prices on stocks and other instruments in the overnight markets versus the standard daytime trades.
It's a great boon to the short-term investor, though, because they can jump into and out of companies' stocks quicker based on events in the news, and it's bound to continue to grow as more companies join the list of available overnight trades.