📘 Module 5 – Scanner Mastery

📚 Lesson 6

The Earnings Probability Scanner™

“Earnings can create opportunity, but they can also create risk that no chart can fully control.”

The Earnings Probability Scanner™ is designed to help traders evaluate symbols approaching an earnings announcement.

Earnings events can produce some of the largest and fastest price movements in the market.

They may also produce sudden gaps, extreme volatility, and outcomes that differ completely from the technical setup visible before the announcement.

The scanner organizes available evidence and helps traders compare potential opportunities.

It does not predict the earnings result.

It does not guarantee the direction of the next move.

Its purpose is to support a more structured decision around an unusually uncertain event.

The Earnings-Trade Mission

An earnings trade begins with one important question:

“Am I prepared to accept the risk of an unexpected gap?”

During a normal trading session, a trader may be able to exit when a stop or trail is triggered.

During an earnings announcement, price can move sharply while regular trading is closed.

The next available price may be far beyond the trader’s planned exit.

Because of this, earnings trades require:

• Greater caution

• Smaller position sizing

• Clear event awareness

• A defined plan before entry

• Acceptance that losses may exceed the intended stop

The possibility of a large reward never removes the possibility of a large loss.

What the Probability Score Represents

The scanner’s probability score organizes multiple conditions into a structured assessment of the setup.

A stronger score may indicate that more supporting evidence is present.

A weaker score may indicate limited alignment or greater uncertainty.

The score should be interpreted as:

A measure of setup quality—not a promise of outcome.

A high score does not mean the company will beat expectations.

It does not mean the stock must rise.

It does not mean the market will react favorably even when the reported numbers appear strong.

Probability helps organize evidence.

It does not create certainty.

Earnings Results and Price Reactions Are Different

A company may report strong earnings and still decline.

A company may report weak results and still rise.

This can happen because market reaction depends on more than the headline numbers.

Traders may respond to:

• Revenue

• Earnings per share

• Forward guidance

• Margins

• Customer growth

• Management commentary

• Previously priced expectations

• Broader market conditions

The market reacts to the difference between what was expected and what was delivered.

This is why predicting the report alone is not enough.

The reaction is what determines the trade outcome.

Know the Announcement Timing

Before entering an earnings-related position, verify when the announcement is expected.

Reports commonly occur:

• Before the market opens

• After the market closes

This timing affects how the position must be managed.

A report before the open may create a gap before regular trading begins.

A report after the close may create immediate after-hours movement and another adjustment by the next morning.

Never enter an earnings trade without knowing when the announcement is scheduled.

Event timing is part of risk management.

Read the Complete Setup

The scanner score should never be reviewed in isolation.

Open the chart and evaluate:

• Current trend

• Market structure

• Recent momentum

• Volume behavior

• Important support and resistance

• Broader market direction

• Sector strength or weakness

• Available reward relative to risk

A high score on a poor chart may still represent an unattractive trade.

The scanner organizes possibilities.

The chart provides context.

Watch for Excessive Extension

A stock may rise sharply before earnings because traders expect a favorable report.

It may also decline sharply because expectations are poor.

In either case, much of the anticipated move may already be reflected in price.

Before entering, ask:

• Has the stock already moved significantly?

• Is price near major resistance or support?

• Is the market expecting an unusually strong result?

• Would a normal disappointment create a large reversal?

• Am I chasing excitement rather than following a plan?

The strongest pre-earnings move may sometimes create the most dangerous entry.

Position Size Is Critical

Earnings risk cannot always be controlled with a normal stop.

A stock may close at one price and reopen far above or below it.

Because of this, earnings positions may need to be considerably smaller than ordinary trades.

Position size should reflect:

• Possible gap risk

• Account size

• Maximum acceptable loss

• Volatility

• Event uncertainty

• Whether the position is held through the announcement

The trader should ask:

“What happens to my account if this gaps sharply against me?”

If the answer is unacceptable, the position is too large—or the trade should not be taken.

Holding Through Earnings Versus Trading the Reaction

There are two very different approaches.

Holding Through the Announcement

The trader accepts the risk before the report and remains exposed to the initial gap.

This approach carries significant uncertainty.

Trading After the Announcement

The trader waits for the earnings result and evaluates the market reaction afterward.

This may allow:

• The initial gap to become visible

• Volume to confirm participation

• Structure to begin forming

• The Cradle™ or Fast Reversal™ to provide context

• Risk to become more clearly defined

Waiting may mean missing part of the move.

It may also eliminate unnecessary event exposure.

Professional trading is not about participating in every possible gap.

It is about selecting risk that can be managed responsibly.

Use the Appropriate Engine After the Report

After earnings, price may behave in several ways.

The Cradle Ignition Engine™ may help when the report creates a strong directional move that begins developing into a sustained trend.

The Fast Reversal Engine™ may help when the initial gap or reaction begins losing momentum and reversal evidence develops.

The earnings scanner identifies the event candidate.

The trading engines help interpret what price does afterward.

The event itself does not replace confirmation.

Beware of the First Reaction

The first move after earnings is not always the final move.

A stock may:

• Gap higher and reverse

• Gap lower and recover

• Move sharply in after-hours trading and change direction before the open

• Open strongly and then enter chop

• Produce extreme volatility without a clean setup

Professional traders allow the reaction to develop.

Speed and excitement should not override confirmation.

Liquidity and Spread Risk

Earnings can cause spreads to widen.

This may make entries and exits more difficult.

A wider spread can lead to:

• Poorer execution

• Greater slippage

• Unexpected losses

• Difficulty exiting at the intended price

After-hours and premarket trading may have lower liquidity than regular market hours.

A chart can look attractive while execution conditions remain poor.

Always consider whether the symbol can be traded efficiently.

Avoiding an Earnings Trade

Sometimes the most professional decision is to stay out.

Avoid or reject the trade when:

• Position risk cannot be controlled.

• The possible gap would be damaging.

• The spread is too wide.

• Liquidity is poor.

• The chart is already excessively extended.

• The probability score lacks supporting chart evidence.

• The event timing is unclear.

• The broader market is highly unstable.

• You feel compelled to gamble on the announcement.

• You cannot explain what you will do under several possible outcomes.

Missing an earnings move is not a failure.

Protecting capital from uncontrolled risk is professional discipline.

Build an Earnings Decision Tree

Before entering, prepare for more than one outcome.

Ask:

What if the stock gaps strongly in my favor?

Will you take profit immediately, reduce the position, or follow a defined trail?

What if the stock gaps modestly in my favor?

Will you wait for confirmation or sell into the opening move?

What if the stock opens unchanged?

Does the original thesis remain valid?

What if the stock gaps sharply against you?

Will you exit immediately, wait for stabilization, or follow another predefined rule?

The plan must exist before the emotional pressure arrives.

Never Add Risk Without a Plan

A trader may be tempted to add to an earnings position after a gap moves against them.

This is especially dangerous when the original thesis has already failed.

Do not add simply because the price is lower.

Do not assume the stock must recover.

Any additional entry requires a new, valid setup with independently defined risk.

A falling price does not automatically create value.

A rising price does not automatically confirm safety.

The Earnings Scanner™ Workflow

A disciplined process follows this sequence:

Review the Earnings Probability Scanner™

↓

Compare the strongest candidates

↓

Confirm the announcement timing

↓

Open the chart and evaluate structure

↓

Review trend, momentum, volume, and key levels

↓

Consider liquidity and spread

↓

Calculate possible gap exposure

↓

Choose whether to hold through the event or wait for the reaction

↓

Define several possible outcomes in advance

↓

Use the appropriate engine after the announcement

↓

Execute only when the risk is acceptable

This workflow keeps the probability score in its proper role—as one part of the complete decision.

Lesson Summary

The Earnings Probability Scanner™ helps traders organize and compare potential earnings-related setups.

It does not predict the report or guarantee the market reaction.

Earnings trading requires:

• Understanding announcement timing

• Respecting gap risk

• Evaluating the complete chart

• Using smaller position sizes when appropriate

• Considering liquidity and spreads

• Preparing for multiple possible outcomes

• Knowing when waiting is better than participating

The scanner evaluates the opportunity.

The event creates uncertainty.

The trader decides whether the risk is acceptable.

🎯 Mission Debrief

Before taking an earnings trade, ask yourself:

✅ Do I know exactly when the announcement occurs?

✅ Does the chart support the probability score?

✅ Is the stock already excessively extended?

✅ Have I considered a major gap against my position?

✅ Is my size small enough for the event risk?

✅ Do I have a plan for favorable, neutral, and unfavorable outcomes?

✅ Would trading the reaction be safer than holding through the report?

✅ Am I making a professional decision—or placing a bet?

Remember:

High probability is not certainty.

Exceptional opportunity may carry exceptional risk.

🌌 L&M Trading Solutions™ Academy Pro Tip

“You do not have to predict the earnings report to trade professionally. Sometimes the greater edge comes from waiting to see how the market responds.”

The report creates the event.

Price action reveals the opportunity.

Confirmation determines whether the trade deserves your capital.

🚀 Next Mission

Lesson 7 – Building the Daily Scanner Watchlist

We will bring the entire Scanner Mastery module together by covering:

• Reviewing all scanner results efficiently

• Separating day trades, continuations, swings, and earnings candidates

• Eliminating weak and conflicting setups

• Ranking opportunities by chart quality and controlled risk

• Selecting the best candidates without overloading the watchlist

• Creating a professional plan before the market opens