The Real Answer is That it Depends on Multiple Factors:
I hear this exact question all the time: “how much can I expect to make day trading/swing trading?” But this is a very difficult question to answer. The fact is – the range of potential outcomes is essentially infinite. There are some traders who lose thousands or even millions of dollars each year, while others make thousands or millions each year. So what are the factors that determine their results?
People are often looking for a precise yearly figure like $50,000, $100,000, or $250,000, but that’s just not how the market works. It doesn’t automatically fulfill all of your wants and desires. There’s no set wage or salary like a normal job. There are a handful of variables that are within your control, and others that are not. So giving out an exact figure to expect, or even a large range, would be a lie.
It can seem counterintuitive, but profit goals and expectations are typically destructive for traders. Obsession over the outcome of every individual trade can be your downfall. When you’re consumed by potential results, the process often gets neglected. Operating effectively within the market environment requires a switch from an expecting mindset to a probabilistic one.
5 Factors That Ultimately Determine Your Trading Results:
Below I’ll share 5 main factors that dictate how much you can potentially make day and swing trading. After assessing all of them, the profit potential can become more clear. But since the market is inherently an uncertain environment, there are never any guarantees.
Some trades you will execute perfectly – and still lose. Others you will execute poorly – and still win. This is what makes trading such a psychologically challenging endeavor. But if you want to ultimately achieve consistent success, it forces you to face your beliefs about money, loss, and uncertainty. The market is the ultimate feedback loop for mental, financial, and overall personal growth.
1. Capital
The amount of capital you have available can have a major impact on results. For example, let’s say we have Trader John with a $100,000 account and Trader Mike with a $10,000 account. Throughout the course of the year, their accounts both grow 30%. John with the larger account makes $30,000, while Mike with the smaller account makes $3,000. They both achieved the same percentage gain, but the dollar gain was drastic – a $27,000 difference. The larger the account, the more money that can potentially be made.
This isn’t to say that small accounts can’t be built up over time, but large dollar gains are much easier to achieve with larger accounts. In our example, Mike would’ve needed an incredible 270% return just to match John’s $27,000 gain. That high of a percentage return within one year would be an unrealistic achievement for the vast majority of traders, especially beginners.
2. Experience/Skill
No matter the starting capital, most traders lose money and ultimately fail for lack of proper skills. Far too many traders treat the market like an opportunity to gamble – to take random trades and act impulsively. But behaving this way doesn’t produce consistent success. Erratic and irrational behavior within the market only produces inconsistent and overall negative results.
People tend to ignore the fact that durable trading success requires specific tactical and mental skills. It’s easy to open up a brokerage account, click a few buttons, and make money on a trade or two out of pure luck or chance. But achieving consistent trading success is an entirely different story. The limited barriers to entry and low physical effort required to execute trades tricks people into thinking it’s easy. But in reality, long-lasting market success requires a high level of training and real-life market exposure.
3. Trading Style
Your personal trading style can also dictate results. To provide some perspective, long-term investors are typically shooting for roughly a 10% return – that’s the historical average market return. But it’s not out of the ordinary for successful day traders to achieve returns in excess of 100% per year. In general, day and swing traders are taking a more active approach, so they want their returns to be in line with the extra time and effort they’re putting into it. Long-term investing is much more passive.
With that being said, there’s nothing stopping you from taking part in all three if it suits your schedule, lifestyle, and preferences. I personally day trade, swing trade, and long-term invest – and there are many other people who do the same. These choices are entirely up to you. But broadly speaking, short-term day and swing traders are shooting for much larger returns than long-term investors. Ideally, the more time, effort, and resources you put into it, the larger the return you receive in the end.
4. Risk Management
Risk management is something that can make or break your trading results. There are many traders that fail to respect the uncertainty involved with every individual trade, and they end up wiping out their accounts as a result. This can involve taking position sizes that are too large in comparison to the total size of their account, not having plans for stopping out of trades or taking profits, and impulsively removing stops or adding to losing positions in fear of being wrong or losing money.
In my opinion, right with acquiring the necessary mental skills, developing strong risk management techniques is one of the most critical factors in determining success. It controls your losses under adverse circumstances and it helps you develop good habits in order to keep you in the game for the long haul. The truth is that losses are an unavoidable part of trading. If you believe that you’re going to win on every trade, then you won’t feel the need to manage your risk, and as a result, you will most certainly fail.
5. Market Conditions
You have no control over market conditions – and you have to accept that. You do, however, have complete control over your reactions to those conditions. It’s like the saying goes: “You can’t control the wind, but you can adjust your sails.” Far too many traders spend their time trying to fight the market when they should be adjusting their attitudes and flowing with it instead.
This lack of control over market conditions trips up a large portion of traders. Most newbies come in searching for foolproof systems. But those simply don’t exist. There’s no system that performs exactly the same in all market conditions. For example, a trending strategy won’t work so well in a choppy market. But that same strategy can work amazingly well in a trending market. When you can align your system, skills, capital, and risk management with current market conditions, the profit potential can be immense.
More Accurately Determine Your Profit Potential With a Realistic Market Simulator:
For those of you wondering how much you can make as a day or swing trader, the most accurate way to find out is to jump right into the market. I don’t recommend that bold approach, however, because you currently lack the experience and skills necessary for consistent success. You most likely haven’t pinpointed your preferred trading style and risk management techniques either. And I’m sure you’re not interested in putting your real, hard-earned money on the line without any of these elements in place.
This is where a realistic market simulator or paper trading platform comes into play. With the functionality of TradingSim, for example, you can choose your starting account value, test different trading styles, practice risk management, acquire core skills, and experience varying market conditions in a realistic environment. At any time you want 24/7/365 and at your own pace (7 different replay speeds, plus pause and play functionality), you can virtually trade any day in the market going back up to two years.
There are a handful of free market simulator games available online that aren’t nearly as realistic. There are also some free simulators with similar functionality to TradingSim, but they typically require clunky software downloads and/or opening a brokerage account. TradingSim is realistic, browser-based, and doesn’t require a brokerage account. It costs $300 per year (breaks down to $25 per month), so the only risk is a few hundred dollars and your time. Proper preparation and training will save you thousands in the long run.
Conclusion – The Amount You Can Make as a Day and Swing Trader is Uncertain:
We crave certainty, yet the market doesn’t offer it. So many individuals go down the treacherous path of trying to blindly copy hot picks from newsletters and alert services. They see cherry-picked and distorted trade results in promotional messages claiming: “30% gain on XYZ in 2 days!” or “$20,000 profit on just 1 trade” – and they think these results are typical. They start thinking that every trade will be a big winner. They don’t want to miss out. But at some point, they realize that those results can’t be duplicated as a blind follower.
In my personal experience, there is no cheating the market. If you don’t acquire the appropriate tactical and mental skills, you have no shot at consistent success. Dependency on someone or something else is a recipe for disaster. The only path is self-sufficiency. Your thoughts, feelings, and behaviors while operating within the market environment need to be ones that serve you – not hurt you. You need characteristics like patience, balance, and objectivity so that you can be in harmony with the market instead of at odds with it.
In the end, consistent execution paired with a statistical edge is what produces profits. The tricky part is that your execution can change based on mental state and your edge can change based on market conditions. So adaptation is required for survival.
Learn More in the Trading Success Framework Course
Written by Matt Thomas (@MattThomasTP)
Related Pages:
- What is Swing Trading – Explained in Detail
- Best Trading Psychology Courses Available Online
- What is the Foundation For Stock Trading Success?
- A How to Guide For the Stock Market – Achieving Consistent Profitability
- Learning to Become a Stock Trader? Don’t Make These Mistakes
I always loved the idea of playing the stock market. But decided food and mortgage was more important. I have grandchildren that have done really well with the market, but when I ask I get that vague, empty, “I’m not telling Nana” look. Probably just as well. I’d be one of those that chase the ‘red hot leads’ off the news letters and such. Your article just reinforced my decision to let the experts handle my money; guys that hopefully know more than I do. Your website is very informative and structured, even for a total newbie like myself.
Hi Cathy – I appreciate you sharing many of your thoughts!
I completely understand the pull of chat rooms, newsletters, and alert services because I fell for those traps early on in my own trading journey. What you think will be an easy way to make money (by blindly copying some guru) just isn’t that simple. There’s far more to consistent trading success than receiving buy and sell alerts from a so-called expert. You also have to have the proper risk management, trader psychology, statistics tracking, and more. This is why I always recommend the path of proper education and training in order for individuals to develop self-sufficiency. Being able to think and act on your own in a rational and calm manner is a critical component to trading success.
I also want to point out one more thing – which is that getting started with trading doesn’t necessarily have to involve a choice between paying bills and blindly throwing thousands of dollars at the market. A lot of people treat day and swing trading like it’s some sort of gamble, but good trading is actually about developing specific skills – and without those skills, beginners really shouldn’t be trading with real money at all. There are various demo trading/market simulation platforms in order to test and refine strategies for little to no cost – like TradingSim. This is where newbies should be spending their time in order to prove their abilities to capture consistent profits and manage risk.
In my personal opinion, the main expense for those just starting out should be a legitimate training program like Thomas Kralow’s University Grade Trading Education – which costs the typical student $1,000-$3,000. But from there, the personal expenses don’t need to be all that high at all. In fact, funded trader programs provide opportunities to earn large five and six-figure trading accounts so that you don’t even need to risk your own money.
It might take a few months to pass an objective tryout – like the Topstep Trader Combine – in order to earn funding (which usually costs $200-300 per month). But once you pass, that fee goes away and you have a substantial account to work with. Not only is it not your own money at risk, but you also have the possibility of earning a meaningful income from it. A lot of people try to start trading with their own $500 account, which isn’t impossible to grow into a large account – but will typically take quite a long time and require incredibly high percentage gains. In order to make $500, for example, you would need a 100% return. But with a $50,000 funded account, all you would need is a 1% return to make that same $500.
All that being said, it’s entirely up to you to decide how you personally want to approach the markets. Short-term trading is certainly no walk in the park – it’s hard work. And it definitely shouldn’t be pursued with money that you can’t afford to lose. But for those who choose to pursue it, proper education and training have to be prioritized. $1,000-$3,000+ might seem like a lot of money, but there are tons of people who ignore proper training and throw even more at the market – only to lose it all due to lack of preparation and ignorance. People have a tendency to want fast and easy riches, but taking shortcuts in trading almost always ends badly. Take care!
I have wondered what it would be like getting a trading education and making quick cash according to the adverts I see on the internets and social medias about how a few months trading changed their lives.
But after reading through your information packed article, I have realized that it is not that simple, and those adverts are just false.
From the 5 factors that determines great results, from my opinion, these steps would involves a lot to be put into it: Time, cash, loads of high quality trading training from a skilled and experience person.
If I would dare to venture into trading business, I would sure keeps all your 5 factors in mind but because of the the tactical, technical and mental factors involved here with all the uncertainty, it is probably not for me because am a very slow learner.
Thank you for analysing all that is involved which has helped me from jumping in as all the adverts says. I now understands it better.
Hi Tina – I really appreciate you sharing your thoughts. The majority of advertisements online try to make trading sound easy in order to attract subscribers/customers, but the reality is that it’s a skill-based, peak-performance endeavor. The mental and tactical skills required to become consistently successful in the market take time and effort to develop. There’s no exact time-frame that it takes – everybody’s trading journey is different – but it’s not something to expect huge, consistent gains from right off the bat.
The journey for almost all traders starts off something like this – whether they end up ultimately successful or not. They hear about the market or see an advertisement and start searching online for the best trading programs. Before they know it, they’re deep into the abyss of near-endless trading programs, platforms, and services – brokerages, chat rooms, newsletters, alert services, etc. The problem is that all of these services want your business. They’re not going to make trading sound hard because people in general don’t take the hard path. They want the shortcut – something that sounds easy. As a result, hoards of people flock into newsletters and alert services in an attempt to blindly follow some guru. But blindly following alerts, in my experience (and hundreds of other traders I’ve come into contact with over the years), never works out as expected. The guru’s profits become distorted while the majority of members get left in the dust. It’s just the mechanics of a pump-and-dump in low-priced, low market cap, and low liquidity trades.
As a result, almost all traders experience massive levels of emotional and financial pain along the way – either from not acquiring the proper mindset, failing to properly manage risk, or taking the copy-cat approach. The only difference between the successful traders and the unsuccessful traders is that the successful traders realize that they have to actually educate themselves, build skills, and become self-sufficient, while the unsuccessful ones give up. But it doesn’t have to be this way if individuals approached trading appropriately right from the start. Lately, it seems like I’ve been spending most of my time trying to talk people out of trading. But it’s not necessarily that I want to talk them out of it because it’s an amazing opportunity for personal and financial growth – I can’t think of a better feedback mechanism for dealing with uncertainty, risk, and loss. And the potential financial rewards are obvious. It just needs to be approached correctly. My main concern is making sure people go in with the right mindset and expectations. Far too many become obsessed with the results instead of focusing on the process – and that misguided focus is extremely destructive within the market environment.
I’ll be completely honest, it’s really hard to get the message across to new or struggling traders that they have to work on developing certain tactical and mental skills if they ever want to achieve consistent success. By and large, all people want is a magical indicator or foolproof system that makes money with zero effort on their part. But this way of thinking is what leads to trading failure. And it’s also why you’ve seen so many advertisements online talking about “quick cash” and “explosive profits”. Unfortunately, that’s what people respond to. It’s the only way to get their attention. Saying something like “the secret to trading success is in your mind” gets laughed off – they think it’s a joke. They want to see dollar signs, fancy cars, mansions, etc. This phenomenon plays out everywhere. After analyzing countless trading education services, the way members use them is typically the same. If alerts are offered – even though blindly following them is detrimental to growth – you can bet that 90-100% of subscribers get themselves set up to receive those immediately. But less than 50% watch the educational video lessons and far less attend the webinars – and the ones they do actually watch cover the “sexy” topics like patterns, setups, and strategies; the ones on mindset, risk management, and position sizing tend to get ignored. This type of behavior also holds true for the articles on my website: the ones that discuss alert services, newsletters, and systems/strategies get the most attention in comparison to risk management, building skills, and mindset-related content. But for the sake of my visitors’ trading success, I really hope that changes.
On the whole, it’s sad that so many traders fail, but even when those who know better lay out the proper path – most people still don’t listen. It’s easy to think that you can simply subscribe to an alert service and immediately start capturing massive gains in the market like clockwork. But it’s hard to think that you should take time to learn the basics, take a mindset course, and practice in a simulator before risking any real money – that’s not exciting and there’s actual effort involved. Unfortunately, those pushing the (false) easy path attract the most attention, subscribers, and sales, while those pushing the (true) hard path have a difficult time gaining any sort of traction. This upsetting fact makes it hard for the legitimate, authentic, and truthful individuals to compete within a space full of disinformation and misrepresentation.