10 Crucial Tips for Earnings Season Trading

Earnings season is coming up next month. We sound like records here at Bulls on Wall Street, but we cannot stress enough how important this time of year is. Earnings season is the best time to grow your trading account, whether you are a day trader or swing trader. Here are 10 things you must know about the earnings season in order to capitalize:

1. Next Earnings Season Begins on October 16th

The first quarterly earnings report of every quarter is the company AA (Alcoa corporation). The 3rd quarter reports will begin on October 16th. 4th quarter reports will be in January, 1st Quarter in April and 2nd Quarter in July. There are a few companies that will be the month after, but this is the general rule of thumb.

2. Typically Occurs During Pre-Market/Post Market

Quarterly earnings reports are never released during market hours  (9:30AM-4PM EST). Companies will either release them at around 8am during pre-market or around 4:05 PM. There will occasionally be mid-day conference calls, but they are not common. 

3. Trade the Reaction To The Report

Quarterly earnings reports have the attention of all shareholders and investors. For many large funds and shareholders, these reports are made or break. These reports tell everyone exactly how well or poorly the company did. Novice traders make the mistake of trying to guess before an earnings report whether it will be good or not. 

This is pure gambling. The edge in earnings trading is trading the REACTION, not trying to guess the direction of the stock prior to the runup.  

4. ALWAYS Check When a Company Reports Earnings Before Entering

I’ve heard so many horror stories of swing traders who became bag holders because they had a big position on right before a stock’s earnings report. On long term positions set a reminder on your phone of key earnings dates, and other dates of significance for the company.

5. Volatility Increases

90% of the time a stock will see a large increase in volatility after an earnings report. This can be your best friend or your worst enemy, depending on whether you can make fast decisions. If utilized correctly, volatility can offer huge returns in a short period of time, whether you are a swing trader or a day trader. 

6. High Relative Volume

Since earnings reports are so made or break for investors and traders, a lot more buying and selling will occur right after a report is released. Stocks will often trade 5-10 times as much as their average trading volume after earnings reports. This liquidity is ideal for us momentum traders. 

7. Great Day Trading Opportunities

Earnings reports can present AMAZING day trading opportunities due to the increased volatility. It is not uncommon to see 5-10% (sometimes more) moves in just a few minutes during the market open. With the right strategies and sound risk management, these periods can be the most profitable times of the trading year for you. 

8. High-Quality Swing Trading Opportunities

Earnings reports can often ignite stock trends that last for several days or weeks. Swing trading is the bests way to capitalize on short term momentum following an earnings report. This can be a more passive way to capitalize than day trading.

9. Earnings Are All About Expectations

Earnings reports are guided by analyst expectations. Positive earnings reports can cause stocks to tank. Negative earnings reports can cause stocks to spike. If a company can have a good earnings report, but not beat analysts expectations, and sell off as a result. The flip side of the coin is that a company can report awful earnings. But if they’re not as bad as what was anticipated, it can still increase in value. Always remember:

10. Price Action Is King

One of the most common mistakes traders make during earnings season is getting too biased. The company reported good earnings, and they get along, and then the stock tanks once the market opens. Remember: The actual earnings don’t matter, only the REACTION to the earnings. 

Earnings Season Masterclass on Thursday

On Thursday we are hosting a free workshop to show you some of our best strategies and tactics for navigating earnings season. With earnings season next month, now is the time to prepare and master strategies to help you capitalize on these opportunities.

Click here to sign up for the free workshop. 

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