Don’t try to trade across profit announcement dates. Even if the stocks you hold have paper loss, you should liquidate them the day before the profit announcement day.
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Profit announcement is not chance.
Some investors regard the profit announcement as an opportunity that they can make a profit, because stock prices are likely to fluctuate greatly the day after the profit announcement day. However, it is too difficult to read how investors respond to the profit announcement. As a result, Trading across the profit announcement days is not so much trading as gambling.
Too difficult to read investor’s sentiment for profit announcement.
Why is it difficult for investors to estimate how other investors respond to the profit announcement? Is it a simple story that if company’s profit goes up, the stock price rises, or if company’s profit goes down, the stock price declines?
No. That’s not a simple story.
Even if company’s profit goes up, the stock price might fall unless it is more than investor’s expectation. Even if company’s profit declines, the stock price might rise unless it is more than the investor imagined.
“Don’t invest gambling on profit announcement.” is introduced in “Swing Trading with Oliver Velez”, which is a very famous book among investors.
【Swing Trading with Oliver Velez】
https://www.amazon.com/Swing-Trading-Oliver-Velez-Wiley/dp/159280151X
I myself have invested gambling once for the profit announcement. On August 3rd in 2015, the stock price of Honda rose, because of its profit announcement. The reason of the stock price increase is in vehicle sales in North America. And then, I bought a Toyota stock on August 4th, which was its profit announcement day. I expected the stock price would rise on August 5, because Toyota’s vehicle share is bigger than Honda’s in North America.
As a result, I got loss due to gambling investment for the profit announcement. Toyota’s profit results were never bad. Although they were rather good, investors didn’t seem satisfied.
Since then, I have never done any gambling investment for profit announcement.
Caution
The contents of this blog are written based on the personal opinions. With respect to the loss caused by investment based on the contents of this blog, I do not take any responsibility.
Thank you,
k-zma
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