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How to Trade a Stocks Earning Report!

October 22nd, 2013

What are earnings?

Earnings occur when a company releases its quarterly news, such as its profit margins or profit targets, to the general public.  This new buzz and excitement attracts new investors to come in because it shows how well the company is doing.

You can find earnings information on many different websites – they are public records.

Why are so many people attracted to playing during earnings?

If the company did very well, it could jump quite a bit due to the earnings news and you can make a few thousand dollars very quickly.

On the other hand, you can also lose a few thousand dollars very quickly, depending on how the company did or when the stock moves down.

Let’s look at Chipotle as an example:

You held 100 shares through earnings (you owned the stock before the quarter ended).  After the earnings reports came out, the stock jumped over 40 points! If you sold then, you could make $4,000!

Sounds attractive, right?

Of course it does! The problem is, you never know when the stock is going to go up or down during earnings. After all, a stock could have phenomenal earnings and still go down after earnings because so many people are selling off to make that money.

Trading during earnings is like gambling. Most of the time, I would recommend that you don’t trade during earnings.

A better route

  • Exit 100% of your position before earnings come out
  • The next day after the release if it looks good, you can enter lightly
  • If and only if, the stock is moving and behaving properly, then buy some more

Let’s look back at Chipotle…

2013-10-20-cmg

We had a 30-point gain on the first day after earnings.  If you had entered lightly using the above plan, you could have made some great money.

The point here isn’t how many shares you have or end up buying.  The point is to understand the system.  You want to focus and learn more about how to trade properly through and during earnings.

Even if you only bought 10 shares on the first day after Chipotle’s earnings report, you could have made $300 during that 30-point run.  It’s smaller, but it is the better and safer way to trade during earnings.

Author: Sasha Evdakov

Sasha is the creator of the Tradersfly and Rise2Learn. He focuses on high-level education speaking at events, writing books, and publishing video courses on business development, internet marketing, finance, and personal growth.

I'm Sasha, an educational entrepreneur and a stock trader. In addition to running my own online businesses, I also enjoy trading stocks and helping the individual investor understand the stock market. Let me share with you some techniques & concepts that I used over the last 10+ years to give you that edge in the market. Learn More

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This website and content is for information purposes only as Rise2Learn, TradersFly, and Sasha Evdakov are NOT registered as a securities broker-dealer nor an investment adviser. No information herein is intended as securities brokerage, investment, tax, accounting or legal advice, as an offer or solicitation of an offer to sell or buy, or as an endorsement, recommendation or sponsorship of any company, security or fund. Rise2Learn, TradersFly, and Sasha Evdakov cannot and does not assess, verify or guarantee the adequacy, accuracy or completeness of any information, the suitability or profitability of any particular investment, or the potential value of any investment or informational source. The reader bears responsibility for his/her own investment research and decisions, should seek the advice of a qualified securities professional before making any investment, and investigate and fully understand any and all risks before investing. Rise2Learn, TradersFly, and Sasha Evdakov in no way warrants the solvency, financial condition, or investment advisability of any of the securities mentioned in communications or websites. In addition, Rise2Learn, TradersFly, and Sasha Evdakov accepts no liability whatsoever for any direct or consequential loss arising from any use of this information. This information is not intended to be used as the sole basis of any investment decision, nor should it be construed as advice designed to meet the investment needs of any particular investor. Past performance is not necessarily indicative of future returns.