Last Updated on 23 July, 2024 by Trading System

With only 2% profit per month on average, a swing trader would make a 24% return in a year, which is higher than Warren Buffet’s 20% per annum average return. Achieving success trading the stock market may seem like an easy thing, but what percentage of swing traders are really successful?

Not too many swing traders are successful in the market, but the reason is not with the swing trading style in itself. Rather, it is due to the fact that most of them start trading the market without first getting the right education on how to approach the market.

In this post, we will explain who a swing trader is, what percentage of them are successful, why only a few of them are profitable, what you can do to become profitable, and how much money you can potentially make as a swing trader.

Who is a swing trader?

A swing trader is a financial market trader who leaves his/her trades open beyond the trading day but not more than a few weeks. So, a swing trader lies in the middle of the spectrum between day traders who close their trades on the same trading day and position traders or investors who leave their trades for several months and years.  

Most swing traders employ the technical analysis approach to the market, so they try to benefit from medium-term price moves that last from a few days to a few weeks. They study the price charts on the daily timeframe and may step down to the 4-hourly timeframe to pick better trade entry levels.

Unlike day traders, who spend all day monitoring and analyzing the price charts on the lower timeframes, swing traders only check their charts at the end of the trading day (or 4-hourly when a trade setup is in sight). So, swing trading is a more suitable approach for a beginner or an experienced trader who wishes to trade part-time while keeping a 9-5 job.

What percentage of swing traders are successful?

What is the swing trading success rate? You may have heard the common saying that more than 90% of active traders lose money when trading the markets. In other words, only less than 10% either break even or make profits in their trading. Some people semantically put it at a better level by stating that 90% fail to make money from active trading, which implies that 10% actually make money from trading while out of the 90% who fail to make money, some lose money and some stay at breakeven.  

While this may seem more like an educated guess than a verifiable statistic, it goes to show that most people who play the market are actually gambling rather than trading with proven strategies. But the truth is, even with the best strategies, many traders simply won’t become rich trading the market, and there are many reasons for that.

Related reading: Is Swing Trading More Profitable (better) Than Long-Term Investing?

Why only a few swing traders are profitable?

One of the main reasons behind the poor success rate among traders is that most people believe that trading is easy and jump into it right away without getting prepared for what lies ahead. To the uninformed, trading is just about clicking the buy or sell button and the market prints money. They don’t bother to get the right education first.

What they don’t understand is that trading is a profession on its own, and just like any other profession, it requires proper education, training, and experience to gain the necessary skills to interpret the market data correctly, make the right decisions, and execute those decisions properly. In other words, the first reason for the high failure rate is the lack of proper trading education and training.

Another main reason for the high failure rate is that not many people have the right psychology for trading. Most of us were trained to avoid making mistakes, so we generally tend to have this mentality of not wanting to lose. Approaching the market with that mentality can be deadly.

Furthermore, the majority of new entrants in retail trading come to the market because they need money to solve one problem or another. As a result of their need for money, they find it difficult to close their losing trades and would rather hope that the market turns back to make them money. And you know how it ends — they blow their accounts.

What you can do to be a profitable swing trader

The most important thing you can do to avoid falling into the category of losing traders is to get the proper trading education and experience needed to tackle the market. You need to understand how the market works, the factors that move the market, and how to handle every situation that arises in your trading.

Another thing is to develop the right trading psychology by retraining your mind to think like a trader. Thinking like a trader means understanding that trading is a probability game with wins and losses but without knowing the sequence of the wins and losses.

Lastly, you must have a stable source of income that pays your bills because the stock market is not where you come when you need money to pay bills. If not, while seeking money from the market at all cost, the market will collect the little you have.

Related reading: How Do Traders Make Money?

How much money can you make as a swing trader realistically?

Now, having known that a lot of people fail to make money from the market, the reasons why that happens, and how you can be among the profitable few, let’s look at how much money you can realistically make from swing trading assuming you do the right things.

Well, this is a tricky question because a lot of factors are involved, such as your experience, trading strategy, and growth plan, but a reasonable estimate could be between 10-40% per annum, on average, provided that you trade with a sensible risk level. The year-to-year returns tend to vary a lot — with some years being exceptionally good and others producing a little return or even a loss. So, you need to approach swing trading with a long-term mindset — swing trading is not a get-rich-quick scheme.

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Final words

Quite a small percentage of swing traders are successful, but the problem is not with swing trading in itself. Some of the reasons for the small success rate are lack of education, not having the trading mindset, and the need-to-make-money syndrome.

Here you can find our archive with all our swing trading articles.

FAQ

What is the average return for a swing trader in a year?

On average, a swing trader making 2% profit per month could achieve a 24% return in a year. This surpasses Warren Buffet’s 20% per annum average return.

How successful are swing traders in the market?

The success rate of swing traders is relatively low. While exact statistics vary, it’s commonly stated that more than 90% of active traders lose money.

Why do many swing traders struggle to be profitable?

One main reason is the lack of proper trading education and training. Many traders enter the market without understanding its complexities and the need for skill development.

What is the role of psychology in swing trading success?

Having the right psychology is crucial. Traders need to understand that losses are part of the game and retrain their minds to handle wins and losses without fixating on avoiding mistakes.

How can I become a profitable swing trader?

The key is to invest in proper trading education and gain experience. Understanding market dynamics, factors influencing prices, and having a well-defined strategy are essential.