I can sit here and tell you all about my positive and profitable experiences, but how much are you really going to learn by an experience where everything was done right?Those posts, and we have them here, have their place. They inspire and encourage but they don’t teach. That’s why on this site you will see both the positive and negative trades, but more of them will be the ones where I made mistakes and learned a huge lesson in the process.

I’ve said it before and believe me I’ll say it again and again, your emotions have no place in any of your trading decisions. If you think that people make it rich by playing hunches or a vibe that they had, I will tell you one of two things. Either they were very lucky or they are lying through their teeth. No matter what the reason, they took a very big risk.

In 2007 I was trading stocks in Sirius Satellite Radio and I was ahead several thousand dollars. Investors were coming into the stock and I was doing great. In the summer the announcement was made that they were going to merge with XM Satellite Radio to form one company and reduce expenses as well as increase revenue.

What I should have done there was to take my “marbles” and go home, but I figured this was the payday that I was waiting for. I’ve been a big fan of Howard Stern and subscribe to Sirius because of him. That’s where my emotions should have stayed.

Instead I took a position in the company after it dropped from where I sold out of all my shares. When the stock dropped some more because of the FCC delays on allowing the merger to go through, I bought more. At this point I was down 20% from cost basis.
After reading about all the hoopla that was circling the companies, I felt that this was all going to blow over and the stock would blast off. When the stock lost another 15% I had a feeling that this was just some sort of typical game that was being played during a long-dragged down fight between the FCC and the two companies.

At this point I lost all the profits that I made earlier in the year on the stock. I figured that I’ll make it all up once the deal was approved. I decided to buy as the stock fell. Not once, not twice, but three time.  Right after that third time, I realized this was a trade that was controlling me, not the other way around.

I was about to start selling when the news was released that the Department of Justice approved the two companies to merge. The price jumped over 33% and I was back in the green again with the trade. At that point I didn’t think anything was going to stop this from going through and I was going to hit it big.

My emotions got in the way (again) as I watched the politicians play their game in trying to destroy the companies and dragged their feet as we waited for the FCC’s word on the merger.

By the time the approval came from the FCC, the two companies had lost millions of dollars each and was expecting to lose more over the next two quarters. I held on for whatever rallies came and started to trim my position in the stock. Unfortunately by the time I got out of the stock I was down over 35%.

If you’re new to the stock market, try your hand at the free fantasy stock market out there. It might give you the experience you need without losing any money. If I had listened to my brain instead of my feelings, I would have gotten out right after the DOJ’s approval came out. I wouldn’t have made that much money, but I also wouldn’t have lost as much as I did.It’s a lesson I learned the hard way. Keep your emotions out of the stock trade. It’s the only was you will survive.

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Earnings reports are quarterly releases that a company will put out to their shareholders to inform them of their progress over a period of time. The period of time is three months (henceforth, quarterly) where the company did business and either made or lost money during that time.
Along with them reporting their past three month performance, they also give guidance to where they believe the company is going.

Wall street analysts who follow the company will put together their estimates as to what they think the company will announce in regards to their earnings. They look at the company’s past report to see if their estimations were correct and also take into consideration what the economy is currently doing. They look at if the company has had a new product come out during that time and how well that product is moving. They will also look at the company’s competitors to see if they are taking business away from them.

After all the information is put together, they release their estimate on what the earning per sharewill be for the company. If the company’s report is in-line with the estimate, it’s looked upon as a good thing providing that the guidance for their next quarter is a favorable one. The company can also, what Wall street refers to as “miss” their earnings report, which means that they made less than what the analyst predicted. When that happens Wall street will look unfavorable towards that and you will see the price of the stock drop and in some cases drop a large amount. If the company “beats” the estimate and gives a great guidance report as well, you will see the price per share jump by a big percentage gain.

This is where you can make some big money within your portfolio.

In the fall of 2007 a company by the name of Research In Motion (NASDAQ:RIMM) was about to release their earnings report. If you’re not familiar with the company, they are the manufacturer of the BlackBerry cell phones. I was following the company for a few months already and knew the the report would be a great one. The company didn’t miss their last four earnings report and their phones were selling like crazy during the summer months.

I went ahead and bought 200 shares of the RIMM stock a couple of days earlier when the priced dropped for just a day and waited for the report. When the report was released, it not only gave a great earnings, but also stated that it would exceed their previous predictions for the next quarter. In that day alone the stock went up $12 per share and continued for to climb for the next two days.

The reason I shared this story with you isn’t to show off, but to let you in on the different ways to make money in the stock market. Like I stated in the beginning of this post, there can be some costly mistakes as well and I’ve lost thousands of dollars in some of my other earnings report plays. The only way that I feel comfortable with trading on the results of earnings reports is during a bull market. My advice is always to do your research and due diligence on every company that you want to invest in.

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