How To Swing Trade Earnings

By Author: Aleem Khan
Total Articles: 1
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If you are trading for some time, you know that stocks never move in one direction all the time. This constant change in direction created three market conditions and those are rally, correction, and consolidation. When buyers are in control due to greed, the stock's price moves up which is called rally, similarly, when sellers are in control, due to fear the stock's price moves down, which is called correction. The third condition is called consolidation and it occurs due to uncertainty where neither buyers nor sellers are in control, hence no change in trend.

Now lets look at how these three conditions work in actual market. When the stock's price begins to rise, at some point owners of that stock will start taking profits, hence the price starts falling. Similarly, when the stock's price begins to fall, at some point buyers will start buying as they see the price as a bargain, hence the price begins to rise again. This cycle continues until uncertainty will become a dominant emotion which will not last long either.

Swing traders are good at managing their emotions and observe the emotional war of other traders ...
... and keep the trend in check. When the stock price starts going up swing traders look for a sell signal and when the price starts going down, swing traders look for a buy signal, and when uncertainty is the dominant emotion a swing trader sits on the side lines and waits.

There are many factors that affect the companies stock price on a short term basis and one of that is earnings. Each company releases quarterly earnings once every three months and annual earnings once a year with total sales and other important data.

For example if a stock's earnings are a few cents below market's expectations, the stock may fall far more than the news justifies. This is due to market's overreaction, eventually the price will adjust itself to a more reasonable level within a few days. Most of the time it takes somewhere between three to five days for the buyers and sellers to recognize the overreaction in price. Swing trader can use this to his or her advantage by waiting for the overreaction to end and adjustment to start.

Timing is the key to successful swing trading. In order to time your buy or sell, a swing trader uses technical analysis. Technical analysis is a method of evaluating stocks by analyzing statistics generated by market activities, such as past price and volume.

We will talk about technical analysis some other time, but for now lets continue the discussion about how to swing trade earnings. If you have any advice, suggestions, questions or comments please my blog at http://www.bestswingtradingstocks.com.