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How Much Money Can I Make Swing Trading?

Swing trading is profitable, and you could make money over long periods of time

14 Min Read
Last Updated April 14th 2021

Interested in how to swing tade stocks or FOREX? Wondering how much money can you make swing trading? This article provides various cases for how much cash you will need to swing trade.

There are many variables for how much money you can make from swing trading. If we compared 1,000 swing traders, even those with the same number of trading years and experience, there wouldn't be one trader with the same income from swing trading.

Some swing traders have a comfortable lifestyle from their trading income. Others make a part-time income from swing trading, but thousands of wannabe swing traders fail to make any money at all, and most lose their money.

But you're not here to read about the high failure rate. You want to know how much money you can make from swing trading, and in this article, we will show you how. After that, it's up to you.

Contents:

Things To Consider Before Swing Trading

How to Make Money Swing Trading Forex

How to Make Money Swing Trading Stocks

How to Make Money Swing Trading Futures

How to Make Money Swing Trading Options

How to Compound Your Swing Trading Profits

Recap for How to Make Money Swing Trading

 

Things To Consider Before Swing Trading

1. How much money you have to trade

If you start with low trading capital such as $1000 - $2000, your returns will be small at first. Proper risk management is the key to success.

If you had, say, $10,000, your returns could be monetarily bigger, but the risk management stays the same per trade. As a swing trader, your focus is to protect your capital at all times.

2. Your experience in swing trading

Never trade with real money until you understand swing trading your chosen financial instrument. Trading is high-risk, and there is much to learn. Before parting with your money, buy a swing trading course and understand what happens in the stock market, Forex market, Futures or Options – depending on which you choose.

Read books and watch videos and open a demo account with a regulated broker so you can put your knowledge into practice. When you have doubled your demo account balance with low-risk trading, then you are ready to go live.

3. Create a long-term trading plan

The charts can move fast, so you need to know what signal you are looking for in the market to enter a trade. Your trading plan will include one or two backtested strategies and a routine for the time of day you trade and how long you spend trading each day.

Allow at least six to twelve months to spend learning, practising, and formulating your trading plan. You may find, as you learn to swing trade, that your trading plan shifts. That is understandable because, with knowledge, you see what does and doesn't work in swing trading.

Read More: The Ultimate Guide to Building a Forex Trading Plan

4. Your natural personality

Are you impulsive or patient? Are you calm or become over-excited with losses and gains? It pays to know what sort of trader you are, and that depends on your natural nature.

A degree of patience is needed for swing trading because you are often waiting for the price to hit a predetermined zone, such as support and resistance. Or you may be waiting for the price to break through a trendline and then waiting for a retest.

At times, you could be waiting days or weeks for the perfect trade. If you aren't naturally patient, it will take mental discipline to resist impulsive trading.

Professional swing traders refer to this process as developing a trader's mindset. By understanding the psychology of the trading mind and the physiological responses when faced with risk, you are way ahead of what most swing traders achieve.

5. What market you want to trade

As a swing trader, you will study the charts of the market you wish to trade, and you will learn fundamental and technical analysis.

You may want to trade Stocks, Forex, Options, or Futures, but your choice will depend on how much money you have to begin swing trading, and it's a personal preference. To avoid confusion, once you decide on the market to trade, it's best to focus on that market and avoid the chaos of cross-trading between markets.

You can get started swing trading Forex with as little as $200, but it will take you many months or even years before you start making an income. Ideally, start with $1000 as a minimum.

For Stocks and Options, a starting capital of at least $10,000 is recommended and, for swing trading Futures, a capital of $20,000.

Of course, these are purely guidelines. You make your own choices for how much money to begin swing trading your chosen market and dependent on the broker requirements.

Remember that with risk management, you are risking only 1% to 2% per trade.

If your monthly target is, say, 5% gain, then it's easy to work out how long it might take you to build your account to the level where you can withdraw a monthly profit but still keep a healthy trading bank.

How Do I Calculate How Much Money I Can Make From Swing Trading?

Let's look at a few scenarios for you

How to Make Money Swing Trading Forex

A swing trader makes a profit from Forex by analysing price action to take advantage of currency pairs' price fluctuations. The Forex market trades a vast $6.6 trillion during market opening hours. Forex liquidity is good, which means plenty of opportunities to enter the market with a trade.

Prices fluctuations are measured by percentage in points (PIPS). Pip value does vary per currency pair

The best aspect of swing trading Forex is that you can trade micro-lots. That means you can begin practising live Forex trading at very low-risk levels. In this way, you can experience the Forex market with real money so that you can become familiar with trading Forex without fear of massive losses.

Imagine you open a Forex account with a regulated broker, and you deposit $2000.

Your risk management plan dictates that you risk no more than 1% per trade. In the below examples, we will also consider your risk to reward ratio (RTR), which is how much money you can win compared to how much you lose per trade.

If you risk 1% of $2000, your maximum loss per trade is $20.

You only take trades with a 3 to 1 RTR.

You place a trade with a risk of 1% = $20, but if the trade wins, the return is $60

For every one loss, you have three wins.

Imagine you take a trade in the morning, and it wins; you are $60 in profit. Then you have three consecutive losses. You have lost $60.00, but your account is back at breakeven because your RTR was 3 to 1.

To reiterate the importance of a high RTR, let's imagine choosing to have a 1 to 1 RTR instead. 

With the same scenario as above, you win $20 then have three losses.

Oh dear, you are now $40 down in your account.

You place another trade for 1 to 1 RTR, and it wins. Yay, $20 clawed back. But then you have another three losses.

Oh, er, you are now $80 worse off for the day. With a 3 to 1 RTR, even with six losses, you would still be breakeven.

If your win rate is ONLY 50%, you will be in profit for the month.

If you take ten trades per week for, say, fifty weeks of the year with a 50% win rate.

That's 500 trades risking 1% of $2000 ($20) and an average win of $60.

250 lost (250 x $20) = $5,000

250 won (250 x $60) = $15,000

Actual profit = $10,000

Hey, that's a spectacular return on a $2000 account, yes? And, we haven't taken compounding into account - more on that below.

Realistically, it's unlikely that you will take that many trades for swing trading, but it gives you an idea of what is possible if you commit to learning how to swing trade Forex.

It's not rocket science. It's good old plain common sense.

How to Make Money Swing Trading Stocks

A swing trader makes a profit from stocks by analysing price movement to take advantage of stock pairs' price fluctuations. it is possible to make money swing trading stocks with a low rate of wining.

You have $10,000 in your stocks account, and you only risk 1% of that per stock trade.

You can risk $100 per trade, and you want a 3 to 1 RTR

The stock price is $50. You want to make a $3 profit, and so you can risk $1 per stock. You can buy ten stocks, risking a total of $10 with a potential gain of $30.(This example is trading without leverage).

Using a 3 to 1 RTR and with a win rate of 50%, let's say you buy 40 stocks a week

Lose ten trades = $400

Win ten trades = $1200

Total weekly gain =$800 (not including broker fees)

It's a simplistic model, but it is possible to make money swing trading stocks even with a low win rate.

Check Out: What Are The Next Stocks To Explode In 2021?

How to Make Money Swing Trading Futures

Futures move in ticks and points, and the tick value is variable for each futures contract. One of the most popular futures contracts for swing trading, and day trading, is the E-Mini S&P 500 (ES).

There are plenty of other contracts available, but we will focus on the ES tick value for this example.

  1.   Each tick movement value is $12.50 per single contract
  2.   There are 4 ticks to a point
  3.   Each point of movement wins or loses $50
  4. Each contract requires over $5000 of margin available

If you have a $20,000 account, you can risk up to $200 per trade (4 points at $50 per point), and with a 3 to 1 RTR, your return would be $600. That's one futures contract.

Is it easy? No. it would be best if you still learned everything you can about swing trading futures and not jump in blindly.

How to Make Money Swing Trading Options

You have now got the idea of risk management for your trading account.

Options are derivatives based on the value of underlying securities like stocks, for instance. A call option allows the buyer to buy an asset at a stated price within a specific timeframe, and a put option is the opposite. The holder has to sell the asset at a price stated within a specific timeframe.

Swing trading options may seem like the throw of a dice. But analysis of the chosen asset is still necessary. If it were a stock option, you would research the company to check recent or upcoming news regarding the stock. You would check the stock's chart and analyse historical price points and price patterns for the stock.

If you are swing trading Forex options, you do your analysis precisely the same as if you were swing trading the currency pair as usual.

You can make money swing trading options if you abide by these guidelines.

How to Compound Your Swing Trading Profits

When starting with a small amount of capital, it can seem like you'll never build up enough money to begin withdrawing some monthly gains.

Compounding is one of the sixth wonders of the financial world. With a long-term compounding plan, you'd be surprised how quickly your capital can grow.

Example of how to compound a Forex Account

You open a Forex account with $2000 and take twenty trades a month with a 50% win rate and 1% risk per trade.

Week One - Balance $2000  (risk $20 win $60)

Trades lost x 5 = $100

Trades won x 5 $300

Total gain $200

Week Two - Balance $2200  (risk $22 win $66)

Trades lost x 5 = $110

Trades won x 5 $330

Total gain $220

Week Three - Balance $2420  (risk $24 win $72)

Trades lost x 5 = $120

Trades won x 5 $360

Total gain $240

Week Four - Balance $2820  (risk $28 win $84)

Trades lost x 5 = $140

Trades won x 5 $420

Total gain $280

TOTAL BALANCE = $3100

TOTAL FOUR WEEK GAIN $1,100

By compounding your capital every week, you have doubled your account, and that's by doing it weekly rather than daily compounding.

Realistically, this is real life. Some weeks you may be on target for a 50% win rate. Other weeks, you have nothing but losses. Occasionally, you exceed a 50% win rate. If it were this easy, we would all be millionaires, trillionaires maybe, by now.

But it is possible, and some swing traders have achieved incredible success with financial and lifestyle freedom. But they won't have done it in a few weeks or months.

Speak to professional swing traders, and they will tell you it took them years of mistakes before they figured out that patience wins the day. They took the time to develop a traders mindset by learning about the psychology of trading and how to overcome their emotions and master self-discipline.

Try not to fixate on compounding your swing trading profits. Ensure you have the best swing trading education possible. Learn about your chosen financial instrument and spend some time working with a demo or simulation account. In the end, it could reap dividends.

Recap for How to Make Money Swing Trading

  1. Choose your financial instrument – you may prefer Forex to Stocks or enjoy swing trading Futures or Options. Find out as much about each financial instrument and then decide which appeals to you most

  2. Commit to your swing trading education – buy a course, read books and watch videos. When you know what you are doing, open a demo account with a regulated broker or a stock simulator account with a broker and spend time trading with pretend money. It also allows you to become familiar with the broker and how they work

  3. Start small – don't throw every penny you have into a trading account. Only trade with money you can afford to lose and only ever risk 1% of your capital per trade

  4. Your account capital will determine monetary profit – if you only have $500 to deposit with your broker, it's going to be a bit of a haul to putting a down payment on a house or buying the luxury yacht of your dreams. 
    Whilst we aren't suggesting you start with more capital, it's essential to be realistic about how long it might take before you can withdraw regular profits from swing trading

  5. Have a minimum RTR of 3 to 1 – you now know you need to have bigger wins than losses. If you stick 100% to a high RTR, you massively increase your odds of long-term success

  6. Don't be in a rush – set aside your trading capital as an apprenticeship into swing trading. Allow a bare minimum of six to twelve months of actual learning with demo and live swing trading. Be the tortoise, not the hare

  7. Stick at it – at first, it may feel like you will never be able to make consistent profits from swing trading. But don't give up. Make risk management your priority. With a $2000 account with a 1% risk of $20, you would have to lose 100 trades to wipe out your capital.

Please note that the above information is not providing advice on tax, investment, or financial services. We provide the above information without consideration for risk tolerance and a specific investor's financial circumstances.

Swing trading financial instruments such as Forex, stocks, futures and options may not be suitable for all investors. It does involve risk and the possibility of a loss of capital.

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