Advantages

After-hours trading was created so that more investors can have the ability to buy and sell stock after the closing bell. Because many people work during the day, they can't buy and sell stock. This allows them to come home and then have the ability to do some trading.

This service is nice for people who live on the west coast, where the stock market opens at 6:30 AM and closes at 1:00 PM. This gives them more time to trade, rather than having to get up really early to catch the market open.

Many companies announce news such as earnings reports, mergers, and acquisitions after the closing bell. After-hours trading then allows people to trade on this news without having to wait until the next morning.

Disadvantages

Sure, after hours trading allows more people to invest at more convenient times but it also has some serious disadvantages that don't really appeal to myself and others.

First of all, because the volume on some after-hours systems is so light, if most orders executed are buy or sell orders the stock's price could move greatly. For example, if some people want to buy 5000 shares of AOL on MarketXT and there aren't that many to sell, the price of the stock would probably go up. But during the regular trading day, 5000 shares of AOL probably wouldn't move the stock's price at all because about 20 million shares trade each day. Of course, as more online brokers join after-hours trading programs, the volume is increasing. And not all after-hours trading services' volume is low. Instinet and Island have the largest volumes which are often over 100 million shares.

Changing stock prices after hours also hurt investors who don't have access to it and place an order for the next morning. For example, let's say that John placed a market order for 100 shares of XYZ stock at 95 for the next morning. But during after-hours trading, XYZ stock jumped 3 points to 98. So John would end up buying 100 shares at $98 per share which would cost him $300 extra.

Also, many stocks announce information that moves stock prices after the closing bell. It seems nice that you would then be able to trade right after the news is announced but if there was no after-hours trading, you would just trade the next morning and everyone would be given a fair chance to trade on the news.

After-hours trading has some great advantages for people but the hype could have some negative affects. So if you plan on taking advantage of these services, try not to get caught up in the hype and keep your focus on your long-term goals.