Trading Mistakes to Avoid – Unaware of Market Movers

When you’re in a trade, you can’t just focus exclusively on price action, volume and the other technicals you use. You also need to have an awareness of stock and general market related events that can have a significant effect on your position. Being unaware of, or ignoring, these events can blindside you and bloody your account.

I’m not referring to unexpected events, which you can’t do much about. I’m talking about scheduled events such as earnings releases, jobs reports, CPI inflation data, geopolitical developments and any sort of announcement or statement by the Fed that can cause significant movement in the price of the security or market you are in the midst of trading.

Suppose you’re trading crude oil or an oil related security, such as XOM or OXY, ahead of a scheduled 2:00pm OPEC meeting at which they will decide whether or not to cut production. Their decision will likely cause movement in the oil market and your stocks, so unless you’re looking to gamble, you probably want to wait until after the decision to take a trade.

Similarly, earnings reports can be landmines for individual stocks. Let’s say you’re holding shares of a tech company, and their quarterly earnings release is scheduled for after the market close. Even if the company beats analyst expectations, the stock could still drop due to weak guidance, shrinking margins, or simply because the market had already priced in the good news. Conversely, a stock might surge on seemingly mediocre earnings if the market was overly pessimistic leading up to the report.

The point is, earnings announcements often defy logic and technical analysis. If you don’t factor them into your trading plan, you could find yourself on the wrong side of a massive move. At the very least, you need to be aware of when these events are happening so you can adjust your position size, tighten your stops, or even stay out of the trade altogether.

This is even more applicable to options because of the way earnings releases impact implied volatility (IV), a key component of options pricing. In the lead-up to an earnings announcement, uncertainty about the outcome tends to drive up IV. This means options premiums—both calls and puts—are inflated as traders position themselves for the potential big move.

Once the earnings report is released, that uncertainty vanishes. The market now knows the numbers, and the stock’s reaction (whether up or down) has already begun. This sudden reduction in uncertainty causes IV to collapse, a phenomenon known as IV crush.

Let’s say you bought a call option ahead of earnings, betting that the stock will rise. The company reports great earnings, and the stock moves up slightly, but your option doesn’t increase in value nearly as much as you’d hoped—or worse, it loses value. Why? Because the drop in IV after the earnings release slashes the premium of your option. Even though the stock moved in your favor, the decrease in IV offset the gains from the price move, (On the flip side, options sellers benefit from IV crush.)

Jobs reports, CPI data, and other major economic indicators can have a similar effect, but on a broader scale. These reports are scheduled well in advance, and they tend to move entire markets rather than individual stocks. For example, a stronger-than-expected jobs report might cause the market to fear aggressive rate hikes from the Fed, leading to a sell-off in equities. On the flip side, a softer-than-expected CPI number could spark a rally as traders bet on a more dovish Fed.

When trading ahead of these reports, it’s essential to understand how the market is likely to interpret the data. Keep in mind, though, that the market doesn’t always behave rationally. Sometimes, a seemingly negative report will trigger a rally, or vice versa, because the market was positioned for an even worse outcome. In either case, sudden price moves powered by automated algorithms can wreck your position by stopping you out on a wick, before reversing in your direction.

Fed announcements, press conferences, and even comments from individual Fed officials can also cause wild swings in the market. For example, if the Fed chair hints at a pause in rate hikes during a speech, the markets could spike sharply higher. On the other hand, hawkish commentary could trigger a broad sell-off. These events are on the calendar, and you need to know when they’re coming. Being caught in a leveraged position during a Fed announcement is not a place you want to be.

If you’re sitting in a long term position, then most of these events will probably not effect your position. In most cases you probably won’t even realize that anything happened, especially if you don’t watch intraday price action. But if you’re an active trader, especially one who trades short-term positions or options, ignoring these events is like walking an obstacle course blindfolded. Scheduled events like earnings, economic data releases, and Fed announcements create an environment of heightened volatility, which, if you’re not prepared for, can potentially leave you with a severe case of whiplash.

Bottom Line

The key takeaway here is simple: know the economic calendar. Before entering a trade, check for any upcoming events that could impact your position. If you’re trading options, pay special attention to how implied volatility might behave before and after the event. If you’re trading stocks, understand how similar events have affected the stock in the past. This doesn’t mean you can predict what will happen, but it does mean you can prepare for multiple scenarios.

Remember, trading isn’t about avoiding risk altogether—it’s about managing it smartly. Knowing what’s on the calendar gives you a chance to prepare and avoid unnecessary surprises. By keeping an eye on scheduled events and adjusting your strategy accordingly, you’ll protect your account and might even find opportunities to turn volatility to your advantage. The easiest and safest way to avoid getting blindsided by a scheduled event is to simply not enter a position ahead of it. The market will throw enough curveballs on its own—don’t let the ones you can see coming trip you up.