Tips For Trading Company Earnings Season
If you have ever wanted to add some edge to your trading technique, consider basing at least some of your trading on earnings season data and timing. If you’re unfamiliar with the ins and outs of seasonal corporate reports, now is a good time to add the concept to your knowledge base. Here are the key facts that can help you navigate the annual cycle of official reports and bolster the strength of your online share trading efforts.
Know the Season Dates
First things first. When do the quarterly reports come out? Typically, it’s the first large entity to report, usually two weeks into each fresh quarter. Then, for about six weeks, everyone else follows. The cycle repeats itself at the beginning of each new quarter.
Watch First, Trade Later
Don’t be in a hurry to use quarterly reports to their potential. For starters, there’s plenty of data up for grabs. Secondly, it’s important to observe at least one full business cycle before gaining a solid understanding of how a company behaves. Some organizations try to ethically fudge data in order to meet targets. If you can sniff out this type of behavior and anticipate it, your trading could take on a new level of acumen. In any case, remember that this is a complex undertaking and is not something you can dive into on day one. Become an astute observer first, learn how a company’s stock price responds to good and bad news, and try to spot trends.
Specialize
If you want to get the most out of the quarterlies, consider specializing in your selection of company stocks. That’s because it’s quite difficult to follow more than a few symbols, digest all the data four times per year, and base a competent strategy on it. Instead, focus on just one or two corporations and learn how they behave through the entire seasonal cycle. Specialization will give you an edge that many other traders miss by aiming too broad.
Study Analyst Track Records
The main TV networks and financial publications seem to treat all analysts the same. This is a mistake that is sort of baked into the system. You can avoid it by studying individual analysts and checking their accuracy. There are plenty of them out there, so choose two or three who are reliable and don’t make big misses half the time. Once you have your favorites identified, use an average of their quarterly predictions for the companies that interest you. At that point, it’s much easier to acquire a true understanding about whether a particular corporation met, exceeded, or missed its targets.
Learn How to Read Financial Reports
There’s no need to become a CPA or financial analyst, but it makes sense to take at least one comprehensive online course that covers corporate financial reports. Some come with titles that include annual report reading or similar wording. The main idea is to learn the basics of data interpretation. When you’re finished, you’ll be adept at understanding how companies legally manipulate the numbers in quarterly announcements and sometimes work a bit too hard to meet analyst expectations.