A company announces spectacular results. The shares open sharply higher. Social media is full of excitement, and you feel the urge to buy before it runs away. This is one of the most common mistakes traders make, and while it sometimes works, it often ends with buying near the top of a move that quickly fades.
Why the urge is so strong
Big moves create fear of missing out. A share that has just jumped 15 per cent looks like proof that the story is true, and buying feels like joining the winners. But by the time you see the move, professional traders, algorithms and early investors have already acted on the news.
Why results-day gaps often fade
When a share gaps up at the open, the early buyers include people closing out bets against the stock and traders reacting instantly to headlines. Once that rush is over, investors who bought earlier may sell into the strength to take profits. Analysts then dig into the details, and if anything disappoints, such as weaker guidance or slowing growth in one division, the enthusiasm can evaporate.
This week, several technology companies reported outstanding numbers, yet their shares fell as investors decided the good news was already in the price. Our Morning Market Brief covers how that unfolded. Our explainer on what “priced in” means explains the logic.
The risks of chasing
- Poor entry price. You are buying after the biggest part of the move.
- Wide swings. Results days are volatile, so stops can be hit quickly.
- No clear level for being wrong. Without a sensible place for a stop, risk is hard to control.
- Emotional decisions. Buying on excitement often leads to selling on panic.
A better approach
Rather than chasing the first move, many experienced traders wait. Some common approaches:
- Let the opening range form. Watch the first 30 to 60 minutes to see whether buyers can hold the gains.
- Look for a pullback. Strong stocks often retrace part of a gap before continuing. Our guide to pullbacks explains how to read them.
- Check the details. Read the guidance and the key figures, not just the headline.
- Plan before results. Decide in advance what you would do if the shares jump or fall, so you are not reacting on impulse.
When a big move can keep going
Sometimes results genuinely change the outlook for a company, and the shares keep rising for weeks. These cases tend to involve a real surprise in future expectations, not just a strong quarter. Even then, waiting for confirmation rarely means missing the whole move.
The takeaway
Excitement is not a strategy. The best trades usually come from preparation and patience, not from reacting to a price that has already moved. If the opportunity is real, it will usually still be there after the dust settles.
If you want to see whether impulsive habits are holding back your trading, take the free Samuel & Co Trading Trader Assessment.
