Some of the most common questions we get about swing trading revolve around how much money you can make. Often the question involves a set time period, like a day, a week, or a year. So, how much can you realistically make in swing trading?

You can make anything between 10%-40% a year on average on swing trading, provided that you have a profitable trading strategy. Your swing trading returns will be affected by a variety of factors, such as position sizing, opportunity, and your ability to follow the rules of your trading strategy.

In this article, we’ll look at the various aspects that determine what returns you could expect to get from swing trading. And in stark contrast to much of the information found online, this will be based on many years of real trading experience, and not only what returns we have accomplished, but also what we have have seen many other traders manage to perform.

Let’s begin!

Can You Make Money Every Week/Month/Year?

How Much Money Can You Make in Swing Trading?

How Much Money Can You Make in Swing Trading?

First of all, we’ll look at the consistency with which you can expect your returns to be made in the markets. This is a topic that many people have unrealistic expectations about, and that we strongly believe is something you should have understood before starting out as a swing trader!

You can’t be profitable every day, week, or even month!

The first thing to realize about trading is that the money doesn’t come in even chunks, once every day. Instead, you’ll experience quite long periods every now and then when you don’t make any money, and find yourself entering mostly losing trades.

This is the harsh reality of trading that most trading vendors never will tell you about. Instead, they continue to delude their clients by telling lies about how you can be consistently profitable every day or week.

This is not the truth for any trading system out there, even though some historical simulations may make it look so. The markets change all the time, and even though you manage to find some sets of rules that have worked well in the past, the performance will deteriorate over time, and cause longer losing periods going forward. This is an inevitable part of trading that needs to be accepted.

Can You Be Profitable Every Few Months?

While it’s extremely hard to remain consistently profitable every month, it’s possible to make new equity highs every few months, even though most traders don’t succeed to perform at such a rate. The issue lies in that you often see the bulk of the profits you make during the year being made during a relatively short time period. As such, you may have to endure some quite long drawdowns before things start to turn your way.

We would say that a reasonable goal is to strive to be profitable on a yearly basis, which actually would mean that you outperform a majority of actively managed mutual funds. That’s not so bad after all!

How Much Money Can You Make Realistically?

Having established that swing trading needs longer time periods to make money on a consistent basis, the apparent question becomes how much money you can make.

Now, this question depends on so many factors that you cannot really provide a serious answer that isn’t a very broad range. However, if we were to give some sort of estimate, we would say that it’s reasonable to expect somewhere between 10-40% annually, on average, provided that you trade with a sensible risk level. The returns year to year will vary a lot, with some years being exceptional, while others might just provide a small return. This is the reason why we cannot stress enough that swing trading needs to be done long term!

Even though achieving 25% returns on average may seem mediocre, it actually means that you double your capital every 5 years, depending on your tax situation. That’s more than twice the rate of the average index fund, which will have a huge impact on your finances in the long term!

With this out of the way, we’ll cover the things you should care the most about, namely the factors that decide how much money you can make!

What Affects How Much Money You Can Make in Swing Trading?

Factors That Affect How Much Money You Can Make

Factors That Affect How Much Money You Can Make

According to us, the factors that determine how much money you can make in swing trading can be boiled down into the following four points:

1. Opportunity

The number of opportunities, or trades you get to take, has a huge impact on how much money you end up making in the end. Simply put you want your capital to be working for you by getting in and out of trades, rather than just lying around in cash.

The number of trades you get to take is hugely influenced by the universe of stocks you trade. For instance, if you limit yourself to the biggest stocks only, you may only have 100 options to choose from. If you instead widen your scope and decide to trade all stocks in the Russell 2000 index, just to name one example, the number of trades you could take will increase manyfold.

Another added benefit of having a lot of stocks and trading signals to choose from is that you may allot a smaller portion of your capital to each trade. This will help spread the risks, and make your portfolio performance much smoother.

We have found that it’s beneficial to trade somewhere between 5-6 stocks at a time, in order to reduce drawdowns and increase the impact of any outsize losing trade.

2. Your Risk Level

Your risk level, as in the amount risked on each trade will have a big impact on your results. For instance, if you have quite a limited number of trades, and risk 2% on each instead of 1%, you’ll get double the returns. However, your risk level will be substantially higher, albeit reasonable!

3. The number of strategies you trade and their robustness

Continuing on the previous theme of opportunity, the number of strategies you decide to trade and their robustness will have a significant effect on your returns. It all boils down to the following points

  1. Strategies that are robust are more likely to continue working well into live trading. Thus, a robust strategy equals more profits.
  2. By trading several trading strategies you get more opportunity and can keep your capital working for longer periods of time.  If your strategies are based on opposing logics, such as mean reversion and trend following, that’s even better!

4. Your Ability to Execute the Strategies

A good trading strategy and good money management rules won’t take you very far if you don’t manage to obey by the rules of your strategy. Many traders simply cannot cope with the psychological challenges that trading imposes on them, and subsequently disobey the rules of their strategies.

Therefore it’s essential that you find a way to keep your nerves at bay in stressful events, not to cause unnecessary damage to your trading account! We recommend that you have a look at keeping a trading journal, which is a great way to organize your thoughts and improve as a trader.

Ending Words

Many people want to believe that it’s possible to make returns of several hundred percent on trading every year. Unfortunately, that’s not possible without reckless risk-taking, which will lead to bankruptcy sooner or later.

However, the returns you can make as a swing trader definitely are good enough to be worth your time. Especially considering that swing trading is a trading form that doesn’t take so much time to execute!

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