What is earnings season, and why is it important for traders?
November 24, 2023
Training in Forex is exciting and complex at the same time, and becoming consistently
profitable is not a day job. You need to learn anything about the market to understand it and to learn how to move along with market makers and the overall market. In this article at Aron Groups Broker, we will talk about earnings sessions. Earnings season is a great opportunity to acquire more information about the market while also offering context to potential share price moves. In the following, we are going to talk about one of the most important Financial events in Forex, during which investors can follow the market closely and use the earnings session as a benchmark to identify their goals.
Table of Contents
What is Earnings Season?
Earnings session refers to a period in which successful corporate publish their quarterly earnings reports. The earnings session begins with the fiscal quarters of major companies, usually falling in January, April, July and October.
Companies need time to put together their information and create a complete report under earnings.
So, to put it simply, one can say that an earnings session is a period which usually lasts for several weeks in which the largest companies announce their latest Financial reports.
What can you find in an earnings session?
These reports are filled with Revenue, net income, earnings per share and forward Outlook of a company that can help you as an investor to decide about your future trades. As you can see earnings session is important because it helps traders access information from major companies that can be considered as Market Movers. let’s say you have one identified as strong Apple earnings report that can be seen as a bullish signal on NASDAQ 100 futures.
Another term you might hear along with earnings session is earnings call, which we will talk about in the following.
What is an earnings call?
Usually, when earning sessions start and companies provide the public with their quarterly
reports, there will be conferences between the company and analysts, press and investors. At this conference, the company will discuss the outcome of an earnings report and answer questions about the company’s management.
These conferences are really important because they provide investors and traders with useful information that can help them make informed decisions.
The discussion is called earnings calls, and not all companies hold earnings calls. The majority of the major list of companies host earnings calls, while smaller companies might not trouble themselves with earnings calls. Major companies provide a phone recording of the earning calls on their website so that investors who couldn’t log in access this information.
When is the earnings session?
Normally, earning sessions start a few weeks after each quarter ends. For example, after December, March, June, and September, there will be an earning session for major companies. You can say that earnings sessions begin in January-February, April- May, July-August and October-November. Although it is unofficial at the start of earning sessions, the first to announce its report is US Bank.
History tells us about the common behaviour of the market, which starts with US Banks releasing their quarterly report, and the earnings session usually ends with Walmart announcing its earnings report.
What does it mean for investors?
As an investor, you need to know that the earnings session is our busiest time of the year for those who work in the market. You need to set your strategies to correspond to specific quarters or fiscal year earnings so as to use the most from the information presented in a report by a major firm.
The reports are really important for analysts and help them conduct intrinsic valuations to determine if the market price of company stock is over or undervalued. By accessing this information, you would be able to make decisions about purchasing, holding or selling the underlying asset.
How to use earnings sessions to your advantage?
So far, we have talked about the importance of the information presented in earnings sessions, but how can you use it? The truth is the information that is provided in this report will make a huge difference to market prices, so if you are looking for a market mover, earning sessions are one of the most important ones. This report can actively alter the direction of the market, which is why it is crucial to learn how to use the reports correctly.
Here, we are going to tell you what to look for when digging into earnings session information:
1. Choose your favorite companies to follow
Remember, you cannot evaluate and analyze all the company’s earnings reports. So, it is
really important to refine your list and focus on a single major company.
You can choose the company based on your already held position or the one you have been considering. Once you choose your favorite company, find out information that they are going to release on the reports. Take a look at the earnings calendar, which might provide you with the date of the release and the details of the stock exchange on which the company is listed.
2. Do your research, but don’t forget to look at the analysis advice.
After choosing the company, you need to look at estimated earnings figures. The most important thing to consider is to understand how close the figures the company provided you with or to analysts’ expectations. If a company performs above expectations, it is likely to witness a rise in the market. On the other hand, if the figures are below expectations, the market will likely sink.
Don’t forget about the history and the past performance of the company by looking at previous quarterly figures.
If a share price rises significantly after a report, it suggests that the report influences the market sentiment. On the other hand, if the price share doesn’t react to the announcement, it suggests that other factors are involved.
3. Choose a trading strategy and stick to it no matter what happens.
Having a trading strategy in Forex and financial markets, it’s one of the most important things a trader must do. You need to have a methodology for opening and closing trades, your profit goals, the time you’re going to spend trading and your risk management strategy. Remember
that analysts are not always correct, and there will be times when earnings sessions lead to a surprise, which can be good or bad depending on the company’s performance.
No matter what happens, you should always consider your positions in the same way before
and after the earnings release. Stick to your trading strategy, and don’t be tempted by your emotions. By doing so, you will be acting based on your logic, not your emotion, and stay prepared for any outcome.
4. Enter a position and Monitor the market closely.
Professional traders know that earnings sessions are perfect for generating investment opportunities. If you are well-informed, you can enter positions as the result of significant Market volatility during such periods. Volatility may cause concern, but it can create opportunities as well. Use your research and make a decision about the next direction of the market and open your trade accordingly.
5. Try to learn from each earnings session
These periods are filled with information about how major companies behave. After you have closed any position you have open during an earnings session, you should look back at your performance. It is recommended to perform a post-trade analysis, no matter what is the outcome of your trade. you should always money for your actions and try to learn from your behaviours as a trader.
By doing so, you will understand yourself better and be more prepared for the next earnings period.
In the end
Earnings sessions are important periods to invest and open positions. Still, in doing so, you should consider that an earning session is a period in which public companies release their quarterly earnings reports.
So, it is normal to witness High volatility During the period the market adjusts to new information.
Earnings sessions occur after the final months of a financial quarter in January, April, July and October. Try to use an earnings calendar to find out the exact dates of company earnings release. Try to select one company and focus on it, as you cannot acquire information about all companies. Don’t forget about the historical data for company performance and analyst expectations.
In order to be a successful trader and benefit from earnings sessions, you need to have a
trading strategy and stick to it. In the end, you need to perform post-trade analysis to learn from each earnings session and prepare for the next.
Remember that you’re not obliged to trade earnings sessions. Earnings sessions might not be the perfect time for you, and you might prefer to close any existing position to avoid the period of volatility altogether.
The choice depends on your trading goals and risk appetite. So don’t be tempted by news, and stick to your trading strategy.