INTERPRETATION OF EARNINGS – You never know how the street is going to interpret the News. Guessing or “taking a shot” in not part of trading! You need to have sound reasoning behind every trade.
SPEED – Beginning traders rarely have the capability to play earnings as it requires tremendous speed and deductive reasoning. Most new traders always seem to be entering these trades when experienced players are exiting positions.
MOVEMENT – For a newbie to the world of day trading, you should watch a few earnings periods as unless you currently have a position in a particular stock, you are more than likely going to be chasing that stock as it may be moving too fast for your skills.
NEWS – It is very common for news to come out and the stock moves in a direction opposite to what you may have thought it would go. This often is due to THE STREET already factoring in my possibilities to this stock prior to any announcement.
RISK – Day trading or trading in general is very risky during the release of earning numbers. The risk to any trader is extremely high, yet the rewards can be great as well. A new day trader must minimize his or her risk ask the speed and reasoning skills increase.
Understanding the risks inherent to day trading and playing earnings is vital to success, however this in no way suggests that you can not play these stocks. Different traders have developed their own styles for playing earnings. Many veteran traders do not trade during the initial move and prefer to watch and wait so they can make a more informed and composed decision, while not getting caught up in the emotion of the moment.