Results days are exciting. A big company reports, the shares jump or plunge after hours, and it feels like an easy opportunity. For many beginners it turns into one of the fastest ways to lose money. The mistake is rarely picking the wrong direction. It is trading the event without a plan.
Why earnings are different
On a normal day, a share price moves gradually, and you can usually get out near your stop. Results are different. Large companies often report after the market closes or before it opens, so the share price can open far away from where it last traded. A stop loss offers little protection if the shares gap straight through it. We explain why in our guide to chasing overnight gaps.
Results also contain several moving parts: revenue, profit, segment figures, guidance, spending plans and comments on the call. The headline can look good while one detail sinks the shares, or the other way round.
What going in without a plan looks like
A typical unplanned trade goes like this. A beginner sees a headline saying a company beat expectations and buys straight away. A few minutes later, the company says on its call that spending will rise sharply next year, and the shares reverse. The beginner holds on, hoping for a recovery, and the loss grows. Nothing in that trade was decided in advance: not the reason, not the size, not the exit.
What a plan includes
A sensible earnings plan answers a few questions before the release. What is the market expecting? Check the consensus estimates and the implied move in the options market. What would change your view of the company? Decide which numbers matter most, such as cloud growth or margins. How big a gap could you live with? Size the position so that a move twice the implied move would still be a manageable loss. And when will you act? Many experienced traders wait for the first 15 to 30 minutes of trading after results before doing anything.
A simple example
Imagine a share at £50 with an implied move of 6 per cent. A planned trader decides that a 12 per cent move against them, or £6 a share, is the worst realistic outcome and sizes the position so that loss would cost no more than 1 per cent of their account. They also decide in advance that if guidance is cut, they will exit at the open, whatever the headline says. When the release comes, they follow the plan rather than reacting to the first headline.
Why beginners skip the plan
The main reason is fear of missing out. Results moves can be big and fast, and it feels like there is no time to think. Another reason is overconfidence after reading a few positive previews. The truth is that the market has already read those previews too, and much of the good news may already be in the price.
How to avoid the mistake
Keep a simple checklist for results days and use it every time. Write down the key expectations, your maximum loss and your rules for entry and exit before the numbers arrive. Consider sitting out the first reaction completely. And record the outcome in your trading journal, so you learn which types of results you read well and which you do not.
The bottom line
Trading earnings without a plan turns an event with known risks into a gamble. Know what is expected, size for gaps, decide your exits in advance and be patient with the first move. If you want to find out how disciplined your own process is, take the free Samuel & Co Trading Trader Assessment.
