The instinct to buy the sharpest red candle on your screen is how retail builds its heaviest bags.
Take $WOLF, shedding -16.8% after reporting fourth-quarter earnings. The retail thesis is always identical: 'It's oversold, the bad news is priced in, a midday bounce is guaranteed.'
The actual historical base rate tells a different story. In 323 historical instances of stocks gapping down 15% or more on earnings, the setup closes red 53% of the time, bleeding an additional average intraday drift of -0.91%. Mean reversion is a statistical law, not a morning guarantee.
The math says patience beats hero trades every single session.