Why Systems Trading is A Business
When you treat trading like a business, you eliminate the emotional roller-coaster. You know your objectives, your edge, and your risk. Every decision is based on data—not gut feelings.Let’s talk about ‘Post-Earnings Announcement Drift’ (PEAD)—a systematic approach to trading earnings winners.This strategy is pretty simple. When an earnings announcement for a given stock surprises the market and gaps aggressively higher, it means that there is a mismatch between data that was already available and this new information. The new information takes time to be analyzed and absorbed into the new models, and that is what creates the opportunity. This strategy has been studied back to the 1960’s, and it consistently provides abnormal (better than normal) returns over a given period of time.
The PEAD strategy is a perfect example of how systematic trading works.
Identify the Edge
Stocks that beat earnings expectations tend to drift higher over the next several weeks. Decades of data prove it.
Define Entry & Exit Rules
It could be a good strategy to buy stocks that gapped up at least 3% on earnings, closed strong, and have above-average volume. Additionally, it may be wise to exit after 10-20 days, or once a predefined risk level has been breached.
Control Risk
A strict stop-loss ensures one trade never blows up your account.
Rinse & Repeat
This happens every single earnings season. Employ a strategy with no guessing, just execution.
The Results
Decades of research show consistent outperformance—with PEAD trades delivering 2.6% to 9.37% per quarter.This isn’t about taking a guess on how earnings will be. It’s a systematic approach backed by data, tested across decades, and something that you can take and test to see if you can make it work for you.You know what the difference is between a gambler and a trader? The trader follows a system Let me show you my system in action. I’ve talked a lot about how well my crypto momentum system has performed during this bull market, but as the saying goes, “it’s easy to make money in a bull market.”In September and October, ahead of the US Presidential Election, the system started buying alt coins. Layer 1’s, Layer 2’s, AI Tokens, Gaming tokens, DeFi, Exchange Tokens, and Memecoins. The election results caused a huge spike and bull run in all of crypto. Great, that was the easy part. Then, at the height of the bull market in mid-December, our system exited all positions and moved back into Bitcoin. I shared this with the folks in our private group recently:
It isn’t just about getting into profitable trades, it’s about keeping the profits.We caught all of the big run up, sold at the top, and have since been watching from the sidelines while the crypto space blew up. And this bull market isn’t even close to being done yet.More By This Author:Size Matters
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