Few good earnings trade can change your life
Of all the methods I have traded so far in 14 years, the method that has made me the most money in absolute dollar terms in shortest period of time is Earnings based Episodic Pivots. The method can double or triple your account in just few weeks. It infrequently produces good candidates but those good candidates can make your year or sometime they can make you 3 to 5 years worth of profit in few weeks.
The starting point to developing the earnings breakout method was one big trade in USLB. In the beginning of 2001 I found a trade that helped me decide to become full time trader and since then I have never looked back.
During the earnings season I found this small stock with multi month neglect that had triple digit earnings. It gapped up on that news and I bought the position with entire capital I had at that time plus some margin. Subsequently I added to the position around 9 and liquidated the position between 14.50 and 14.
In 11 weeks I made 4 times more money than I was making in a 100000 a year job. Once I closed the trade I made up my mind, never to work again for someone else. If I can make 4 times my salary in few weeks all that I have to do is find 4 to 5 trades like this in next decade was the thinking. And that decision has paid of.
On an average I find one good trade like this in a year. Some years you find 10 to 12 such trades , some years you find only 1 or 2. The trick is to wait for all stars to line up for these kind of trades and then risk sufficiently big amount to make a difference. Last year FB made lots and lots of money for me and my friends for whom I help manage money.
Unless you really find a big earnings trade like these you will never be convinced of the power of these trades. The kind of explosive moves. In 2007 in September I saw a Chinese company announce earnings and they were blowout earnings with triple digit sales and earnings growth. I bought big on margin around 14 price . In 13 days I sold the stock for 38 as it gaps and started reversing.
Over the years I have developed structured method to find these kind of trades during earnings season. And over the years after catching some of these big moves and systematically studying some past big movers and talking to others who also trade similar ideas I have a much better understanding of what to look for in these kind of candidates.
Big moves start during earnings season and if you track them you can find some real big trades that can forever change your life....
The starting point to developing the earnings breakout method was one big trade in USLB. In the beginning of 2001 I found a trade that helped me decide to become full time trader and since then I have never looked back.
During the earnings season I found this small stock with multi month neglect that had triple digit earnings. It gapped up on that news and I bought the position with entire capital I had at that time plus some margin. Subsequently I added to the position around 9 and liquidated the position between 14.50 and 14.
In 11 weeks I made 4 times more money than I was making in a 100000 a year job. Once I closed the trade I made up my mind, never to work again for someone else. If I can make 4 times my salary in few weeks all that I have to do is find 4 to 5 trades like this in next decade was the thinking. And that decision has paid of.
On an average I find one good trade like this in a year. Some years you find 10 to 12 such trades , some years you find only 1 or 2. The trick is to wait for all stars to line up for these kind of trades and then risk sufficiently big amount to make a difference. Last year FB made lots and lots of money for me and my friends for whom I help manage money.
Unless you really find a big earnings trade like these you will never be convinced of the power of these trades. The kind of explosive moves. In 2007 in September I saw a Chinese company announce earnings and they were blowout earnings with triple digit sales and earnings growth. I bought big on margin around 14 price . In 13 days I sold the stock for 38 as it gaps and started reversing.
Over the years I have developed structured method to find these kind of trades during earnings season. And over the years after catching some of these big moves and systematically studying some past big movers and talking to others who also trade similar ideas I have a much better understanding of what to look for in these kind of candidates.
Big moves start during earnings season and if you track them you can find some real big trades that can forever change your life....
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9 comments:
Hello Pradeep,
Is the structured method you talk about, the Episodic Pivots method?
Yes and there are more learnings and modification to it after the Stockbee Advance Bootcamp.
Hi Pradeep,
Mind sharing which broker(s) do you use for all your trading ?
I use IB Tdameritrade and Fidelity for my trading.
I do not agree trading during earning . Going back it looks easy but truth is you get slaughtered if you buy based on good earnings. There is no guarantee stock will go up for next 10 days . I am not sure on what basis you are picking up those stocks which will go up. Earning based stocks go up only for a short period which is one day when it opens in a big gap and u can not trade because it is already opens very high price then it goes down in pull back or people short them. I have lost tons of money in earnings trade. Please do not misguide people.
If u did make, u must have been very lucky once or twice but most of the time u will get killed .
PEADS or post earnings announcement drift is well researched, backtested and proven way to trade. Almost all professional traders who make millions know about it and trade it. Been doing it for 20 years.
How important does the overall market come into play with these types of trades? Like bigger direction of the market, not day-day
no role
Hi Prandeep, really enjoying reading through this blog. On these specific EP plays, I am struggling to understand how you enter and place a stop without taking much risk. Often these types of trades one would be entering at up20% on open so how does one place a stop it can easily swing down to 16% and rise further and kick you out. Do you enter pre-market but how do you do that(does IB offer that) and don't market makers move the price instantly anyway? Appreciate more insight into this. Thanks.
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