Earnings season comes around every quarter and it is generally a very volatile time for the stock market. Investors are trying to weigh both the results from the company as well as the future guidance from the company. The volatility and the large volume in individual stocks makes earnings season a good time for traders to try to make some money moving in and out of these names that are reporting their earnings. Let’s take a look at four tips to help you make money trading stocks during the earnings season.

Four tips for trading stocks during earnings season

1. Consider price movement and expectations prior to earnings- This is is important for traders to do because some stocks consistently move upward before they report and sell off even if they report good news. This is the classic buy the rumor and sell the news trade, which occurs frequently during earnings season. If expectations have been low, the stock is much more likely to pop from any kind of positive surprise.
2. Pay close attention to forward looking statements- The truth of the matter is the stock market is generally much more concerned with how the company is going to do in the next quarter than it did in the last. Those who simply look at the bottom line number are often missing the point.
3. Use historical norms to help plan trades- Take a look and see how a company typically does when it reports earnings. There are some companies that are constantly disappointing while others seem to always surprise to the upside. You need to know this information before trading these stocks.
4. Place stop losses on your trades- I’m not always the type of person that advocates stop losses, but if you are going to do a lot of trading in earnings season you should probably considering placing stop losses. Since volatility is extremely high this will give you a little bit of a safety net should things go wrong.