Many beginner swing traders wonder how much money they can make using profitable trading system. I’ve heard often from aspiring traders that they want to make 100% profit or even higher regularly with stock swing trading. 100% each year and sometimes even every month. But is that a realistic goal? Are such results possible?
Typical average profit rate for swing traders
I‘ve met many different stock traders. Some of them were day traders, many of them swing traders. I also met traders from hedge funds that had specific trading strategies, often combined with global macro analysis. I would call them mid-term position traders.
Most of them revealed that their average yearly results fluctuate in range between 15 to 30%. They were able to make hundreds percent on some individual trades, but their result always tend to finish in this range.
If you are a small trader with an account of less than $20 000, you can experience several years of 50%+ returns. But don’t take it for granted. As your funds grow your ability to make this return regularly will decrease.
Win/Loss ratio for profitable trading system
A common assumption of many aspiring traders is that you should make at least 70 or 80% profitable trades. They think that this amount of profitable swing trades is necessary to make living with swing trading system.
I had similar ideas in my head when I started trading years ago. But this is entirely wrong. Typical profitable and successful swing trader often has only 50% profitable trades. It is possible to make profit only in 40% of all trades and still be a profitable swing trader.
Why is this possible?
It is all about math. If you manage your risk accordingly then your profit from a trade is at least two times larger than your loss.
So if you make three profitable trades, and you make $1000 per trade, then after three trades you generated $3000 gain.
If you then make three losing trades, and your loss per trade is $500, you total loss after these trades is $1500.
Your final result after this series of 6 trades is net gain $1500. And you achieved only half of your trades profitable. That is great, isn’t it?
Winning rate of the most successful swing traders
Now you know that it is fine to have only 50% of your trades profitable. The rest are small losses that are well covered by your profits.
I know several good swing traders that were able to make average of 50-60% profitable trades. They make an excellent living by stock swing trading.
Some of them have an amazing year from time to time and have a winning rate higher than 60%. They achieve extraordinary results during such period.
Results can vary
It is typical that winning rate varies from quarter to quarter. The situation on the market changes all the time. Some periods are more favorable to swing trading strategies you use and some are less. Your goal is to recognize what is the actual situation and adjust your trading accordingly.
Keep your trading journal and analyze your results every quarter or at least twic ea year. You will be able to spot what is the typical winning rate for your swing trading strategies and how it fluctuates during a year.
Three keys for making money with swing trading
There isn’t any secret indicator or other special ingredient behind making money with swing trading stocks. There are plenty of successful swing traders, but you have probably never heard of them. If you meet a profitable stock trader, you will learn that he typically uses these three aspects in his trading.
- Profitable swing trader uses proven and simple swing trading system
His system is based on simple trading strategies without complicated indicators.
- profitable swing trader uses rules to manage risk in every single trade
He puts emphasis on risk management and rates it higher than stock picking. His risk per trade is not too high. He understands that his first goal is to protect his money and profits will come.
- Profitable swing trader doesn’t hesitate to quit losing trade early
He never falls in love with a trade. If the trade is not working, then he ends it as soon as possible to minimize loss. He keeps his loss small, most of the time lower than maximal loss per trade based on his rules.
Draw inspiration from these points and use them in your own profitable trading system. Good and consistent results shall be your reward.