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How Much Money Can I Make Swing Trading

Here are scenarios for how much money you can make as a swing trader, based on how often you trade, the risk/reward ratio of your trades, how often you win, and the capital you start with.

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Updated: Sep 26, 2022

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There is a massive range of incomes for swing traders. Most swing traders will still need to work another job to fund their lifestyle, but may be able to pull a secondary income out of market each month. Then there are swing traders who live comfortably solely based on their trading income. Finally, there is the small percentage of swing traders who make a very high (and consistent) income. The flip side of this is that there is a large group of want-to-be traders who will fail and will never make any money.

How much money you make as a swing trader is largely determined by:

How much money you start with. If you start trading with $2,000 your income potential (in dollars) is far less than someone who starts with $20,000. Percentage returns shouldn’t vary too much whether you are trading $10,000 or $100,000.
How often you trade, how often you win, and the size of your profitable trades relative to your losing ones.
How much time you put into learning how to invest properly. To create consistent swing trading income–where you also create a solid trading plan and are able to implement it–will likely take six months to a year (or more) if you dedicate yourself to regular practice.

Your income potential is also determined by your personality (are you disciplined and patient?) and the strategies you use. These issues are not our focus here. We’ve looked at 9 ways psychology can sabotage your trading, and we recommend you read that article to understand some common practices that are known to affect traders’ results.

When swing trading, the market you trade–stocks, forex, options, or futures–doesn’t matter too much. All have their own advantages and all offer similar profit potential. The main difference is the amount of capital required to start trading each market.

Start with as little as $2,000 for forex swing trading. For stocks and options start with at least $10,000. For futures swing trading, start with $20,000+. These are the minimums I would recommend swing trading with. Your income, in dollars, is tied to the amount you trade with, even though smaller and larger accounts can typically expect similar percentage returns on their trading capital each month. For example, if you make 5% a month trading a $2000 account, your income is $100. If you make 5% a month on a $60,000 account, your income is $3,000. Same percentage return but very different dollar amounts.

Now, let’s go through a few scenarios to answer the question, “How much money can I make as a swing trader?”

For all the scenarios I will assume that you never risk more than 1% of your account on a single trade. Risk is the potential loss on a trade, defined as the difference between the entry price and stop loss price, multiplied by how many units of the asset you trade. That calculation is known as position sizing.

There is no reason to risk more than 1% of your account on a single trade. The maximum you should risk is 2%. As I will show, even with keeping risk low (1% or less per trade) you can earn a solid income from swing trading.

Use the scenarios to create your own income projection using the market you want to trade, the trading capital you have, the win rate of your strategy, and the reward/risk of a typical trade you take.

The scenarios below assume you have a strategy that works, have practiced it and mastered it. During your initial year swing trading, don’t expect to make these types of returns; you will very likely lose money in your first 6 months to a year.

You can also look to use trading expectancy to calculate the typical profits for the trades you place.

Where you can swing trade:

How Much Money Can I Make Swing Trading Stocks with $20,000

If you risk 1% of $20,000, you can risk up to $200 per trade. Assume you want to buy a $50 stock, place a stop loss at $49 and a target at $53. Your trade risk is $1 for each share you own (entry price minus stop loss, or $50-$49). Therefore, you can buy 200 shares at $50. If the price drops to $49 you lose $200. If price rallies to $53 you make $600.

Buying 200 shares only uses $10,000 of your capital (200 x $50), so you still have $10,000 to use on other trades. If you utilize leverage, which is often provided at 2:1, that means you actually have 2 x $20,000 = $40,000 to work with. This leaves you $30,000 in “buying power” to make other trades.

Assume you find 5 trades a month that provide this type of trade setup.

Assume you win 60% of your trades.

Your reward:risk ratio on this trade is 3:1. If the trade is a winner, you make $3 for every $1 you risk.

These scenarios have been selected because they are reasonable. With a decent strategy that produces 3:1 reward:risk ratios, and wins about 60% of the time, you should have no problem finding about 5 trades per month.

Your monthly return is as follows:

3 trades are profitable: 3 x $600 = $1800

2 traders losers: 2 x $200 = $400

Monthly Gross Income = $1400 (attained from $1800 – $400)

On the high-end you will pay $10 per trade, or $20 to enter and exit a trade. Commissions costs are therefore: 5 x $20 = $100.

Monthly Net Income = $1400 – $100 = $1300.

That’s a 6.5% monthly return, or 78% yearly return (uncompounded).

See the Variations section below for ways to increase or decrease this return.

How Much Money Can I Make Swing Trading Forex with $5,000

In the forex market, prices move in pips. If you are swing trading, typically you will be using a 20 to 80 pip stop loss, depending on the pair you are trading. The smallest position size you can take in forex is 1000 (called a micro lot), which is buying 1000 worth of currency. When trading 1000 worth of currency each pip movement is worth $0.10 (for the EURUSD or GBPUSD which are common swing trading pairs, although pip value does vary by pair). That means if you buy 2000 worth of currency (2 micro lots) you will be making or losing $0.20 per pip. There are also mini lots and standard lots (10,000 and 100,000), which will make or lose us $1 or $10 per pip of movement.

Using this information, we can calculate expected profit from a swing trading system.

If you risk 1% of $5,000, you can risk up to $50 per trade. Assume you use a strategy that places a 50 pip stop loss and 150 pip target.

For each trade you can take 10,000 worth of currency (a mini lot). If you lose 50 pips, you lose $50. If the price reaches your target you make $150. You have a $5,000 account and you are utilizing $10,000, this means the trade requires leverage of at least 2:1. Likely you will want more leverage if you are going to be taking multiple positions at the same time.

Assume you find 5 trades a month that provide this type of trade setup. You may personally find more or less, this is just an example.

Assume you win 60% of your trades.

Your reward:risk ratio on this trade is 3:1. If the trade is a winner, you make $3 for every $1 you risk.

Your monthly return is as follows:

3 trades are profitable: 3 x $150= $450

2 traders losers: 2 x $50 = $100

Monthly Gross Income = $350 (attained from $450 – $100)

Many forex brokers are commission free, and this is an OK way to go if swing trading. My forex broker charges $2.5 per $100K traded. In total you are trading $100,000 for the month; $50,000 to get in (5 trades x, 10,000) and $50,000 to get out. Your commission cost will only be $2.5….or basically nothing.

Monthly Net Income = $350

That’s a 7% monthly return, or 84% yearly return (uncompounded).

See the Variations section below for ways to increase or decrease this return.

To learn how to swing trade forex… including basics to get you started (order types, currency pairs to focus on, defining trends…), 20+ strategies and a plan to get you practicing and successful.

How Much Money Can I Make Swing Trading Futures with $30,000

Futures move in ticks and points (a certain number of ticks make up a point). The tick value for each futures contract is different. One of the most common futures contracts for day trading or swing trading is the E-mini S&P 500 (ES). You can trade other contracts, but our example below will focus on ES, and its tick value.

Each tick of movement is worth $12.50 for one contract, and there are 4 ticks to a point. So each point of movement will either make you, or cost you, $50. Each contract requires that you have $5225 (more with some brokers, this figure is from the NinjaTrader Brokerage) in margin. This has nothing to do with your profit or loss though, you still make or lose $50 per point.

If you risk 1% of $30,000 you can risk up to $300 per trade. That means at most your stop loss can be 6 points away, because 6 points x $50/point = $300, which is your maximum risk. With a 6 point stop loss you may end up doing some day trading, because in volatile conditions the S&P 500 can move 6 points in a hurry.

Assume you set targets on your trades at 18 points (+$900), so your reward:risk is 3:1.

Assume you find 5 trades a month that provide this type of trade setup. It is quite likely you will find a lot more than 5 trades per month, since 6 to 18 points of movement isn’t very much in the ES contract. It typically moves between 15 and 30 points per day (depending on whether it is in a low or high volatility phase).

Assume you win 60% of your trades.

Your monthly return is as follows:

3 trades are profitable: 3 x $900= $2700

2 traders losers: 2 x $300= $600

Monthly Gross Income = $2100 (attained from $2700 – $600)

On the high end you will pay $10 per trade, round trip. Commissions costs are therefore: 5 x $10 = $50.

Monthly Net Income = $2100 – $50 = $2050.

That’s a 6.8% monthly return, or 82% yearly return (uncompounded).

See the Variations section below for ways to increase or decrease this return.

How Much Money Can I Make Swing Trading Options with $10,000

You likely now have a good idea of how win rate and reward/risk ratios play out in determining your income. Options are a “derivative” in that their value is derived from an underlying market, such as a stock or futures contract.

With a $10,000 account you can risk up to $100 per trade (1% of 10,000).

If you expect to make $300 for every $100 you risk, your reward to risk is 3:1. If you win 60% of your trades and make 5 trades a month your income is as follows:

3 trades are profitable: 3 x $300= $900

2 traders losers: 2 x $100 = $200

Monthly Gross Income = $700 (attained from $900 – $200)

On the high-end you will pay $10 per trade, or $20 to enter and exit a trade. Commissions costs are therefore: 5 x $20= $100.

Monthly Net Income = $700 – $100= $600.

That’s a 6% monthly return, or 72% yearly return (uncompounded).

See the Variations section below for ways to increase or decrease this return.

Compounding

Most swing traders compound their account initially. For example, they start forex swing trading with $10,000. They withdraw some profits but also leave some profits in there to keep growing the account. Eventually though, most traders hit a cap they are comfortable with and then start withdrawing any profits over that amount, or funneling profits into other endeavors (like investing, or real estate). So most traders do not infinitely compound their swing trading.

Instead, they reach a level of income they are comfortable with and then they stay there. For a day trader it may be $1,000/day, and for a swing trader it may be $5,000 or $12,000 or $60,000 per month. Each trader has a different level where they feel comfortable. That is not to say you can’t keep compounding your returns, but as your income grows the motivation to do it becomes less and less. It also becomes harder to effectively deploy larger amounts of money.

Most independent traders aim to make their target return, on the amount of capital they are comfortable trading, in order to attain a good income from their trading.

Get profitable first. That is hard enough. Worry about compounding later, because it will happen naturally as long as you are willing to grow your account. Once you feel you don’t need to compound anymore, withdraw profits and it is no longer an issue to think about. I find new traders often get hung up on the idea of compounding, when instead that mental effort could be directed toward getting good. Unless you are consistently good at trading, compounding returns is not something you need to even think about.

Considerations and Variations On How Much You Can Make

If you could take 10 (valid) trades a month, instead of 5, your income would double. If you take less than 5 trades a month, your income drops accordingly. This assumes you maintain the 60% win rate and 3:1 reward to risk. Increase the win rate or increase the reward:risk, while maintaining the other ratio, and your income will increase. If win rate or reward:risk drop though, expect a decline in income.

If you average reward:risk ends up being 2:1, then your monthly profit drops to about 3.5% to 4%, assuming all other variables stay the same.

If the win rate is 50%, at a 3:1 reward:risk, the monthly profit also drops to about 4%. Very slightly changes have a huge impact on profitability.

Risk 2% per trade, instead of 1%, and your income also doubles. Risk 0.5% per trade and your income is cut in half. This assumes all other statistics stay equal.

For simplicity, these scenarios assume that you would enter and exit positions within the month. That may not necessarily be the case. If your trades last 2 months, then this income would be spread out over two months. If your trades typically only last a week or so, then the scenarios are accurate, assuming you can replicate the conditions above.

You can also play with the position size and the stop loss level, while keeping the reward:risk the same. For example, in the forex scenario the price needs to move 150 pips to reach your target. If you want trades to only last a few days (so you can get into more trades) you could create a strategy with a 30 pip stop loss and a 90 pip target. These trades won’t last as long, so you can find more of them, and all else remaining equal, increase your income.

In the stock scenario above the price needs to move $3 to hit your target. If you want short-term trades, use a $0.50 stop loss and a $1.50 target (just an example–each trade is unique and should be handled as such). With the stop loss a smaller distance from your entry point, the position size can increase, but your income stays the same assuming you stick to a 3:1 target…just a different way of generating it.

How Much Money You Can Make Swing Trading – Final Word

The income potential in each scenario is only affected by account capital, and commissions. Notice that all the percentage returns are very similar for each market. Once you know how to trade, one market isn’t necessarily better than another. It’s just preference, and what suits you.

Your statistics could be very different than the scenarios presented above. Based on your demo trading, insert your own win rate, and your own reward-to-risk ratio.

The scenarios are setup so you only win a bit more than you lose, and your winning trades are only a bit bigger than your losing trades. In the real world, that is typically how swing trading goes. Successful (and consistent) traders don’t try to hit home runs on each trade. They trade a simple system that gives them an edge (like above).

Maintain discipline, keep your wins slightly bigger than your losses, and strive to win 55%+ of your trades. Do this, and you can make a good secondary income from swing trading….and possible a livable income once your account is large enough.

Winning 60% of the time is not as easy at it sounds though, and you may not be able to find 5 valid trades per month in all market conditions.

Expect variance in your income from month to month, as your monthly income will oscillate above and below your average.

Put in the work required over at least 6 months to a year. Most traders fail, so if you don’t want to fail you need to put in the work that will match those in the top 5%. It is only after you have mastered a method when trading becomes less stressful and less time-consuming.

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Sources & references

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