"BEFORE THE BELL - NEW YORK, Feb 17 (Reuters) - Shares in Dell Computer
Corp. fell in pre-opening trade Wednesday after the personal computer
maker reported slowing revenue growth in its fiscal fourth quarter. Dell tumbled to 75 on the Instinet electronic trading system from a Wednesday closing price of 88-3/4."

Ouch! My 100 shares of DELL that were worth $8,875 yesterday are only
worth $7,500 this morning?   Preposterous, can't be . . . who is this
privileged class that is allowed to trade after the markets are closed?
It has to be illegal . . . who can I sue?

Sound familiar?  This phenomenon you are experiencing is what is called
AFTER HOURS TRADING. Contrary to common belief, it is available to you
and I, but as with other "special devices," it has its risks. So, before explaining some of the alternative methods of AFTER HOURS TRADING let me first post this sign:

  WARNING - EXPLOSIVE MATERIAL - ENTER AT YOUR OWN RISK!

Why?  Because at first glance some may get heart palpitations in
anticipation of how they too can be some of the few catching the action
while the rest of the world looks on.  However, it's not that glamorous
and it carries a lot of risk that the average investor shouldn't be
taking.  This article is designed to inform you about the unknown, not
lead you into it. Knowing what's going on behind the scenes is valuable
information BUT it doesn't require you to go out and become an active
participant.

*****************************

The major exchanges, NYSE, NASDAQ and AMEX, do officially close at 4:00
p.m. Eastern Time.  However, there are several mechanisms that permit
AFTER HOURS TRADING.

   PACIFIC STOCK EXCHANGE (PCX) - this exchange is open an extra 30
minutes in regular trading hours, until 1:30 p.m. Pacific Time (4:30
p.m. Eastern).

   INSTINET - run by Reuters. You will often hear CNBC mention
pre-market trading on Instinet in the morning.  A worldwide brokerage
service and member of all major exchanges, Instinet is used primarily by institutions. The network trades in nearly all US markets, as well as in foreign securities. It is a private electronic clearing network where members are allowed to trade anonymously.  Both market and limit buy and sell orders are placed and then matched in the system by the Instinet Corporation.

   CROSSING SESSIONS - round lots of 100+ shares are matched at each
day's closing price. All crossing session trades are executed
simultaneously at the close of the session. If there is a surplus of
buyers or sellers for any particular stock, those trades will not be
completed. The NYSE and AMEX both have "crossing sessions" from 4:10
p.m. to 5:00 p.m. The Pacific Coast Stock exchange has a similar
after-hours session that closes at 4:50 p.m., and the Arizona Stock
Exchange has one that closes at 5:00 p.m.

   INTERNATIONAL MARKETS - some U.S. stocks are listed on exchanges all
over the world and trade on those exchanges while U.S. exchanges are
closed. If you have a brokerage account on a foreign exchange you could
trade after hours that way.

While most individual investors cannot trade directly in the above
markets, some brokerages offer after-hours trading to their clients and
if you trade with one of them, you may be allowed to participate. A few
that I understand offer services in some or all of the above markets are Jack White, J.B. Oxford Holdings, Muriel Siebert & Co. and Quick &
Reilly.

   SELECTNET - many day traders who trade with SOES (Small Order
Entry/Execution System) also use a trading network called SELECTNET,
which is a NASDAQ-sponsored trading network that was originally designed for use by brokers and dealers.  The hours of operation for these folks are 8:30 a.m. to 5:15 p.m. You can only trade NASDAQ stocks in blocks of 1000 or more shares and it's available to you and I for only about 30 minutes before and after the normal markets operate.  There are no "closing price" limitations so if a market maker or other NASDAQ subscriber is willing to trade at your specified price, the trade will be executed.

The following web site lists Brokers specializing in day trading,
several of which offer SOES and SELECTNET trading:

http://www.investorlinks.com/broker-daytrading.html

Now that you are an informed investor and know of several avenues to
pursue AFTER HOURS TRADING, why the caution?  Bottom line, trading after hours by the average investor or trader is NOT recommended because it can be very risky.  Why you ask?

THIN VOLUME
First, volume in after hours trading can be very thin. When a stock is
reported to be trading lower in after hours trading, there is no
indication of how many shares have actually traded, just that it traded
at a certain price. How often have you heard that a stock was trading
lower in after or pre-market trading, only to see it open much higher in the morning?  Imagine the influence on public perception when you hear on the news that INTC traded at $28 in after market trading (oops, it was only 100 shares and the sell order should have been for $128!)

Though this is an extreme example, you can smell the "manipulation " of
the pros.  Jeez Louise, I'd sell a 100 shares at 10-point loss so I
could buy low a little later and make a 5 point gain on a short position of 1000 shares! Net, net, after hours is a risky time to trade and it's very hard to compete against the pros.

NO BID/ASK QUOTES
Aside from stocks being thinly traded, you have to "guestimate" what to
offer to buy or sell your shares at as there are no quotes to guide you. Also, remember orders are matched.  If you are trying to sell, there needs to be someone who is willing to buy and visa-versa.

POWER AND TIMING OF NEWS
What drives a lot of after hours trades?  News.  News that comes after
the market closes or before it opens.  But, when you consider the
limited playing field and that the majority of the players are likely to react the same way, whose going to be on the receiving end?  Though I view this is the least risky element, time is money and I could be
cooking dinner rather then ordering Chinese because I'm spending another 30-60 minutes in front of the tube!

On occasion there is going to be significant news coming out while the
markets are closed and you are going to hear about a stock trading
significantly up or down as a result of that news.  If it's positive,
great!  If not, don't panic.  Sit back and think.  Yes think!  Often the low or high of the day will occur in the first 15 minutes of trading. Don't get caught up in it unless it is to your advantage.  Plan several trade scenarios based on whether the pre-opening trend continues or reverses. Then, EXECUTE your plan! If you've had an opportunity to read Dan Smith's "Financial Keys," you'll remember the importance of getting and using GOOD INFORMATION in combination with VISION and DISCIPLINE to ensure successful trading.  Planning your trade is VISION and following your plan is DISCIPLINE.

Evaluate after-hours news very carefully to determine it's likely effect on the price of a stock or on the markets in general. You have to decide if that news alters the VISION that led you to buy the stock in the first place. Once you make your decision, pursue it with DISCIPLINE.

As you can see, after-hours trading is not all glamour and profit.  It
can be a brutal game and most every-day traders don't have the tools
needed to win (even if their broker does allow it.)