Real0ne
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Joined: 10/25/2004
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quote:
ORIGINAL: theq
For those interested in the stock market (I'm not sure how many that is):
I wanted to pose an ethics question about After-Hours trading. What is your take on issuing a limit buy/sell after-hours order on some low-volume stock at a price that is significantly in your favour when compared to the last trade of the day (IE: 10% up if you are selling or 10% down if you are buying) in the hopes of having someone who doesn't fully understand how after-hours trading works placing a market order that hits your limit order?
Ex: I want to by 50 of XYZ whose last trade was at $25. I place a limit order for 50 @ $22.50 in the hopes that it gets filled by some novice after-hours trader.
Personally, I have mixed feelings. I wanted to get the input of others who are into the stock market.
Q
If you enter it as a limit order you "might" be ok. You have to know the rules of each clearing house, and of course you have to either live with the spread or factor it into your auto trading algorythm if you are automated. I do all mine in excel so I have no orders showing on any exchange, they just fly through when targets are hit. Remember most trading systems hit your number, then you get the next one thats in line, not the one that did the initial trigger. Not sure how close you like ot cut it. One problem is of course is to insure whatever you trade has good liquidity in the event you need to reverse the trade or simply bail because someone farted and stunk up wall street.
As far as ethics is concerned anyone can trade after hours there is nothing preventing you or anyone else for doing so. Dont forget after hours here is not after hours in the asian or europeon markets and they trade our commodities options etc too.
After hours trading as in day trading is not for the faint of heart or the inexperienced trader. Sometimes in your case tho if you want to watch the grass grow you can sit there and get better entries on short covering or profit taking, or exits on the converse, that is as long as you are on ther right side of the trade to begin with.
One thing to keep in mind is that you wont find to many novices in after hours trading but there are plenty of wolves fleecing the sheep and with such a small order it decreases your odds of catching that novice compared to the guy dumping 1000+ shares per order or block orders.
As strictly an entry platform and using limits you are reasonably safe only if your order is hidden from the exchange. If it sits on the exchange all it takes is a blip (if you know what I mean), then a turn around and it goes against you.
If you are swing trading and its within your calculated drawdown well then still no problemo. A lot depends on how you trade too. Anyway enough on that.
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Ethics: Stock Market and After-Hours Trading - 
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