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Mar-01-2021 22:15printcomments

Trading Stocks During Earnings Season

Keep in mind that profit isn’t the only metric to monitor.

Trading stocks
Trading stocks during earnings season

(SALEM, Ore.) - Earnings season is a period of great activity in the stock market, and investors may struggle to define their plan for trading.

Each earnings season comes at the close of a company’s financial quarter. After the company’s income and profits have been tabulated, that information is made public. The results of the earnings season lead to a massive upswing in the number of buyers, sellers, and traders looking to improve their portfolios.

There are a few simple steps that can alleviate some of the associated stress and impulsivity.

Keep reading as we talk about four things to consider before you trade stocks – whether you deal with actual shares or trade contracts for difference via platforms such as Easymarkets; these tips will help you navigate your way through earnings season.

Watch the calendar

There is no set date on which companies enter their earnings season. This is due to a range of factors, including the exact fiscal year each business adheres to and how long it takes for their accountants and bookkeepers to produce reports. However, there are four periods of the year for earnings season.

As a rule of thumb, fiscal quarters end in March, June, September, and December. The earnings season occurs in the two- to four-week period that follows. It’s important to keep an eye on the earnings calendar year round, so you can set aside time to review company reports and adjust your portfolio.

Choose your metrics

Once reports are released, there is usually a mad dash to move stocks, especially among novice investors. It can be tempting to see a dip in profits and make a knee-jerk decision to sell or trade your shares. But you should keep in mind that profit isn’t the only metric to monitor.

Look for other indicators of company success or decline. If you’re investing in an internet-based platform, for example, quarterly revenues can vary throughout the year. However, a continual increase in user sign-ups is a strong indicator that the company is going to continue growing in the long-term, even if profits weren’t as high as predicted.

Compare similar stocks

On that note, don’t look exclusively at your own portfolio. Companies in the same industries and niches can often reveal a larger pattern in the market. These patterns can be influenced by holidays, political unrest, poor weather, and many other factors.

This can also be used to identify better trading opportunities. Sometimes adjacent companies in the same industry are about to experience a boom in profit. Lower-cost shares with another business can translate to better investing benefits in some instances.

Maintain your risk level

Finally, it’s important that you maintain your risk level. Savvy investors always have a stop-loss strategy in place to protect their investment. This strategy is especially crucial during earnings season when so many trades are taking place.

You may see a remarkable upswing in other stocks, as well profits that have far exceed Wall Street predictions. Don’t follow your emotions and give into extremely risky investments.

Instead, calculate the acceptable risk to your trading account before making any major moves. Follow these steps and you can make it through earnings season with a clear head.

Source: Special Features Dept.


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