As the world waited for the bulk of Q3 earning reports to come in, it was only natural that U.S. markets would drop in late July, especially considering the fact that the major indices have been flirting with new record highs on a pretty consistent basis for the couple weeks before this. On Monday, July 25th, the Dow Jones Industrial Average fell by 0.42 percent, while the S&P 500 fell by 0.30 percent. Those are not unusually large numbers, but the drop shouldn’t have been a surprise to anyone that’s been observing the markets. It’s only natural that investors be cautious after these indices have been in the new territory that they’ve been seeing.

Another consideration is the price of oil. Crude dropped by over $1 per barrel on July 25th, about 2.4 percent. It settled at $43.13 during U.S. trading hours, and it was the lowest price that oil has seen in about three months. The drop in price was set off by news that there is an oversupply in the commodity. Also, with gasoline stocks being at relative high points, there was room for a drop. Expect the gasoline stocks to follow oil’s suit in the coming weeks.

Following the loss of price in oil, the energy sector was easily the biggest loser in the stock market on Monday. The sector as a whole fell by 1.99 percent, dragging much of the market down with it. It performed more than 1.2 percent worse than the next worst performing sector. Basic materials, who had the second worst performance of the day as a sector, only lost 0.67 percent. Consumer goods, both cyclical and non-cyclical set the tone when it came to gains on Monday as they were the only two sectors that showed gains. Their gains were negligible at best, gaining 0.25 and 0.21 percent, respectively.

The earnings season can often be the catalyst for a lot of movement in other areas, and that’s exactly what we have been seeing here. Many companies are going to show surprisingly good earnings at this time of the year. Qualcomm is one that has already done so, jumping up by 8 percent at one point. While this is certainly an extreme example, it’s not uncommon to see movement like this during earnings season, especially when a surprise pops up. As you go about looking for trading opportunities, there are a few things that you should take into account, as illustrated above.

Let’s break this down a little more generally. First, there is more volatility than normal in stocks during earnings season. If you are going to trade a stock, know the conditions that surround it. Have an earnings calendar at your side, know what analyst expectations are, and know what the reality is, once it’s released. Opportunities will literally reveal themselves to you on a daily basis, even with the big stocks that binary options brokers use exclusively.

Second, be aware of world conditions. Oil is a good example here because it is so prevalent, but it’s not the only thing that can drag down or lift up a market. This is the bigger context, and if you are not referencing it in your trading, then you are putting yourself at an automatic disadvantage, which is the equivalent of wasting money. And that’s the exact opposite of what you should be doing as a trader, regardless of the assets and the timeframes that you focus on.

Finally, adjust your timing. Yes, the Dow fell by a bit on this day, but it wasn’t all at once. If you were a binary options trader focusing on put options, you would have had the right idea, but if your timing was off, you still would have lost money. Adjust your strategy to fit what’s actually going on, not what theory says.