[[Start here]] → [[What works in stocks?|what works]] → [[maintain your discipline|discipline]] → profit warnings --- ![[profit-warning.png]] Profit warnings are a fact of life for all of us stock market investors, but there's a huge amount of confusion about what to do when they happen to one of your stocks. We aggregated [245 UK profit warnings](https://www.stockopedia.com/books/profit-warnings/)[^1] in some extensive Stockopedia research and developed some statistical rules of thumb that give clarity on how to act. Trust me, profit warnings happen to everyone. Don’t be a rabbit, act. Use these principles from the research to base your actions on: - [[profit warnings are anticipated by price declines]] - [[sell immediately on a profit warning]] - [[profit warnings lead to significant declines]] - wait at least six months before buying after a profit warning - [[profit warnings almost come in threes]] - [[only hold the highest quality stocks after a profit warning]] - only buy the highest quality stocks after a profit warning - [[profit warnings bounce intraday proportionally to their decline]] - only trade on profit warning day if the shares are down 30% - defensive shares are less likely to experience profit warnings - avoiding cheap shares minimises profit warnings - avoiding weak stocks minimises profit warnings [^1]: Stockopedia.com [The Profit Warning Survival Guide](https://www.stockopedia.com/books/profit-warnings/)