Earnings season is a period when publicly traded companies release their quarterly earnings reports. Most companies align their quarterly reports with the calendar year, so each quarter will begin in January, April, July, and October. Companies tend to start releasing their reports two weeks after the quarter ends and it will usually run for about six weeks.

Earnings season is extremely useful to investors as it can help them gauge how a particular company, sector or even the broader economy is performing as a whole. A strong earnings season is likely to boost help the stock market appreciate in value. And a weak earnings season is likely to cause the stock market to decrease in value.

A company’s earnings report includes a whole host of information, but there are usually three key pieces of information/data investors will focus on, these include:

Earnings-per-share (EPS)
Investors use this metric to calculate a company’s profitability. To calculate the EPS, you need to divide the company’s net profit by the number of outstanding shares. The higher a company’s EPS, the more profitable it is.

Revenue
This is simple. It’s just the company’s sales minus the cost of goods. If a company’s revenue is growing, then this is positive as it highlights that the company is expanding.

Outlook Guidance
A company’s earnings report often includes guidance about how they expect the business to perform going forward. It’s very much dependent on the current market conditions as to whether this guidance is pessimistic or optimistic. Investors will compare all this data to analyst estimates to determine how a company performed in comparison to expectations. If the actual data doesn’t align with the estimates, then it will likely cause movements in the company’s share price.

This upcoming earnings season should prove to be an interesting one. Many stocks have already lost a lot of value this year as investors fear the effects of sky-high inflation and rising interest rates on companies’ earnings. Market analysts also share these concerns, resulting in them slashing their estimates for many companies, including big names like Alphabet and Amazon.

Although it’s difficult to predict what will happen this earnings season, you can expect volatility, particularly among tech/growth stocks. If earnings across the board are better than feared, it could help ignite a stock market rally. But if earnings are worse-than-feared, it could help the bears tighten their grip on the market.

This earnings season is almost certain to create volatility, meaning there will be plenty of potential trading opportunities for you to benefit from. Here’s how you can open a position on a company reporting earnings:

1. Research and analyze the stock you want to trade
   How do you think your chosen company performed over the quarter? If you anticipate weak earnings, you could go short. If you anticipate strong earnings, you could go long.
2. Create a trading strategy
   Determine your goals, entry/exit rules, and money/risk management procedures.
3. Open a position on one of easyMarkets’ trading platforms
   Decide your amount to trade, the amount to risk and whether you think the price will increase or decrease.
4. Close your position
   Carefully monitor your position and close it once the price reaches a level you’re satisfied with.
   So, there you have it! That’s how you can trade shares. If you’re ready to get started, check out our earnings season calendar above to discover which earnings reports you might like to trade.