Well its that time again, earnings season is about to get underway. For some its a welcome opportunity for greater profit potential. For others its a quarterly burden, which causes unexpected volatility and concern. Today we will focus on how you can trade around earnings weather you are a day trader, short term trader, or long term investor.
For day traders its show time. This is the moment they live and breath for. Earnings season creates the type of volatility that allows for greater chance of success. If you like to day trade then this is the time to get in there and mix it up. Start by looking for stocks that report earnings and have a large gain or loss in the pre-market, or post market. This will attract many other day traders and cause a vast amount of volatility on the open allowing you to place trades early and frequently.
Second, look for stocks that have had large single day moves due to earnings and continue to look to play them in the days following the announcement. Many time day traders will try to ride a stocks momentum for multiple days after the earnings release.
For the short term traders you want to be careful about starting new positions on stocks that will report earnings in a day or two. Many people like to trade the potential moves right at earnings, and if that is your style then look to place the trade at the last possible second. If you do not like playing around earnings then be sure to look on the platform at the earnings date. As the date approaches you will see the exact date listed by the quote on the web trader. Try to avoid those stocks until after earnings.
For the long term investor this is really your chance to see if you want to continue to hold your position. While you may not make any adjustment as the earnings approaches, you will certainly be interested in the details of the report. If you invested due to some fundamental reason then this is your chance to do a little research and be sure that everything is still on track.
Long term investors are usually trading after the announcement which causes the activity for the day traders, and short term traders. Interesting how that works huh?