Retail investors get whipsawed every quarter: hold and it gaps down 12%; sell and it rips 15%. Institutions plan for weeks - most of us react in minutes.
You've got your brokerage app and maybe a Yahoo Finance alert :)
You don't need to predict the print; you need a repeatable process. Here's the playbook we use at MarketCrunch AI to survive - and often thrive - during earnings season.
Here's the actual playbook we use at MarketCrunch AI for navigating earnings season without getting killed.
Two Weeks Before: The Preparation Phase
Most people start thinking about earnings the day before the report. That's way too late. Your decisions should be made well in advance, when you can think clearly without time pressure.
Step 1: Make Your List
Two weeks before earnings season starts, list every stock you own that's reporting. Not just the big positions. Every single one. You can find it from Yahoo! Finance: https://finance.yahoo.com/calendar/earnings/
For each stock, write down:
- Your entry price
- Your current gain or loss
- Why you bought it in the first place
- Whether you're willing to hold through earnings
Do this now, not at 3:58pm on earnings day.
Step 2: Check the AI's Historical Analysis
For each stock on your list, look at how it typically behaves around earnings. MarketCrunch AI tracks this automatically, but you can do it manually too.
What you're looking for:
- Does this stock typically beat or miss estimates?
- When it beats, does the stock actually go up?
- How big are the average moves (up and down)?
- Does it tend to sell off even on good news if it's run up too much beforehand?
Hypothetically, if Apple has beaten earnings in something like 85% of quarters over the last five years. Sounds great, right? But the stock only went up the next day about 60% of the time, because the market often prices in the beat ahead of time.
Knowing this changes how you think about holding Apple through earnings.
Step 3: Decide Your Position Sizing
This is critical. For each stock, decide right now how much you're willing to lose if earnings go badly.
If you own $5,000 of a stock and you're not willing to lose more than $400, then your maximum acceptable drop is 8%. If the stock typically moves 10–12% on earnings, you probably shouldn't hold the full position.
Maybe you trim to $2,500, which caps your potential loss at $200 even if it drops 10%.
The time to figure this out is now, when you're calm and rational. Not when the stock is gapping down at the open.
One Week Before: The Setup Analysis
Now we're getting tactical. One week before a specific earnings report, here's what you need to do:
Step 1: Check Current Positioning
Look at where the stock is relative to where it was a month ago. This matters more than most people realize.
Step 2: Understand What Metrics Actually Matter
Not all earnings beats are created equal. You need to know which specific numbers move your stock.
For Tesla, delivery numbers matter way more than EPS. For Amazon, AWS growth is the whole game. For Microsoft, Azure revenue is what everyone's watching.
MarketCrunch AI correlates price movement for price action and other positive/negative news related to metrics tracks which metrics have historically correlated with post-earnings moves. But you can figure this out yourself by reading the last few earnings transcripts and seeing what analysts keep asking about.
Step 3: Check Options Implied Volatility
The options market tells you what kind of move traders are expecting. If options are pricing in an 8% move, that's useful information.
What MarketCrunch AI does internally is compare current implied volatility to what actually happened historically. If the options market typically overestimates the move for your stock, that's an edge.
You can check this yourself on your broker's options chain. Look at the at-the-money straddle price and divide by the stock price. That gives you the implied percentage move.
Three Days Before: Final Preparation
You're in the home stretch. Time to make final decisions.
Step 1: Review the Four Scenarios
Best case: They beat and raise guidance. What happens? Good case: They beat but guidance is in line. What happens? Bad case: They meet but don't beat. What happens? Worst case: They miss or guide down. What happens?
For each scenario, estimate the probability and the likely stock move. Then calculate your expected value.
If you've got a 40% chance of making 6%, a 30% chance of making 2%, a 20% chance of losing 3%, and a 10% chance of losing 10%, your expected value is about +1.3%. That's barely positive. Maybe not worth the risk.
Step 2: Set Your Alerts
Don't plan to watch the stock tick by tick. That's how you make emotional decisions. In addition to setting alerts in your brokerage, set free alerts with us.
Instead, set specific price alerts for your exit points. If the stock hits your stop loss, you sell. If it hits your profit target, you take some off. No discretion, no "let me see what happens."
Step 3: Final Decision Time
You've done all the analysis. Now decide:
Option A: Hold your full position Do this if you're long-term focused and the short-term move doesn't matter to you. But you still need a stop loss.
Option B: Trim before earnings Take some profits or reduce your position size so the potential loss is acceptable. This is often the smartest play if you're up big.
Option C: Exit completely If you're not comfortable with any of the scenarios, just sell. There's no shame in taking a win and sitting out the volatility.
Option D: Wait and buy after If you're not in yet, consider waiting until after earnings to enter. Let the dust settle, then buy the dip if you like the setup.
Earnings Day: Execution
The report drops. Now what?
Step 1: Don't React Immediately
The initial after-hours reaction is often wrong. The algos are trading on headline numbers before anyone's read the details or listened to the call.
I've seen stocks pop 5% after hours, then give it all back by the next morning when people realize the guidance was weak. And vice versa.
Give it at least an hour. Better yet, wait until the next morning.
Step 2: Read the Release, Not Just the Headlines
If you're going to trade on earnings, actually read the earnings release. Not just the headline EPS and revenue numbers.
Look for:
- What was guidance?
- Were there any one-time items that skewed the numbers?
- What did management say about the current quarter?
- Were there any business segment surprises?
MarketCrunch AI parses all this automatically, but it takes you maybe 10 minutes to skim the release yourself.
Step 3: Listen to the Tone on the Call
Numbers matter, but management's tone matters too. If the CEO/CFO sounds defensive, uncertain, or overly promotional, that's a red flag even if the numbers look okay.
If they sound confident and are matter-of-fact about challenges, that's usually positive.
You can't quantify this, but it's important context.
Step 4: Execute Your Plan
Remember those alerts you set? The stop losses and profit targets? This is when you use them.
If the stock hits your stop, sell. Don't wait hoping it will come back. Don't average down unless that was part of your plan from the beginning.
If it hits your profit target, take some off. You don't have to sell everything, but lock in some gains.
The Day After: The Real Move
Here's something most retail investors don't realize: the real move often happens the day after earnings, not immediately after the report.
The after-hours reaction is algorithms and fast money. The next-day move is when real investors (including institutions) have digested everything and made decisions.
MarketCrunch AI tracks this pattern specifically. For many stocks, if the after-hours move is moderate (say, 3–4%), the next day tends to see follow-through in the same direction. But if the after-hours move is huge (8%+), you often get a reversal get reversal the next day as people take profits or buy the dip.
Wait for the first hour of trading to see which way the momentum is really going. Then reassess.
What to Do When It Goes Wrong
Let's be real: you're going to have earnings trades go against you. It happens to everyone.
Here's what not to do:
- Don't average down on a broken thesis
- Don't hold hoping it "comes back eventually"
- Don't blame the market or the company for your decision
Here's what to do:
- Take the loss according to your plan
- Review what you got wrong (was it the analysis, the execution, or just bad luck?)
- Adjust for next time
If you connect MarketCrunch AI to your brokerage (request access) tracks every earnings trade we make, win or lose, so we can see patterns for the stocks you ownin what works and what doesn't. So, you can stay on top of movements for stocks you already ownYou should do the same, even if it's just in a simple spreadsheet.
The Biggest Mistakes Retail Investors Make
After watching hundreds of earnings trades, here are the mistakes I see over and over:
Mistake #1: No plan going in They decide in real-time whether to hold or sell. Emotions take over, and they make the wrong choice.
Mistake #2: Betting too big They put 20% of their portfolio in one earnings play. Even a 60% probability trade can go wrong, and when it does, they're devastated.
Mistake #3: Ignoring the setup They focus only on whether the company will beat estimates, not on how the stock is positioned or what's already priced in.
Mistake #4: Not taking profits The stock pops 8% on earnings and they hold hoping for more. Then it fades back down.
Mistake #5: No stop loss The stock drops 12% and they hold hoping it recovers. Meanwhile, their capital is tied up in a losing trade.
Bottom Line
Earnings season doesn't have to be a casino. If you prepare systematically, understand the risks, and execute with discipline, you can navigate it successfully.
AI helps by providing historical context and systematic alerts. But the discipline and execution? That's still on you.
That's the playbook. It's not sexy, but it works way better than hoping and guessing.
FAQs
Should I ever hold through earnings? Yes - if short-term volatility doesn't change your long-term thesis and the position size respects your max loss.
How do I find the implied move easily? Add the ATM call + put on the nearest post-earnings expiry and divide by price. Many brokers display the %.
If I'm a long-term investor, do I still need a stop? You still need an invalidation level (price, metric, or thesis event). Stops help protect capital and reduce decision fatigue.
Is post-earnings drift real? Markets often show follow-through after positive surprises and mean-reversion after outsized after-hours moves. Use it as context, not certainty.