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How many trades do you want to do

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Swing traders look for 5 to 20% kind of moves in a short period of time. Position traders look for 40% to 100% kind of returns per trade.

For swing traders focusing on 5 to 20% moves, in order for these moves to make a difference to your account you need to understand the maths of returns.

Let us say you hold 20 positions of same size in your 100k account. Then each position becomes 5k. Let us say a stock you buy goes up 10% after entry , how much is it going to contribute to your overall profit.

Only .5%. You will need 200 such trade for a 100% returns.
But wait a minute for most traders the success rate of a trade actually working is going to be around 50% only. Which will mean 200 trades will not get you to doubling.
Supposing you risk 25% on each trade instead of 5% of capital. Then a trade with 10% potential will give you 2.5% overall return. If it is 20% return trade it will give you 5% overall return on your capital. You will need roughly 15 consecutive trades of 5% overall profit to double your money.
And you can keep on doing this math to understand the maths of swing trading better.
The implication of that is in order to make big returns in a year you will need anywhere from 300 to 100 trades depending on how much you risk per trade.
If you do not want to do that then position trade. You can if you have skills look for position trading method which will you that kind of return in 4 to 5 trades. Very few people in the trading world will have that skill.

The easier path is to swing trade and expect to make 300 to 400 trade if you are looking for triple digit kind of gains.

But at the same time, everyday look for opportunity where you can put in 25% or more of your capital in one idea. In a year if you get few of those big wins of 4 to 5% or 10% returns on your capital, it then drives your returns higher.

If you understand this maths you will also understand why good day traders make big returns. It is simple maths, there per position risk is higher. A day trader often puts in significantly large part of his capital in one single trade. So even a small 3 to 4% profit contributes more to his or her returns. Add to that leverage and you are looking at magnified returns.

Now let us suppose you understand this maths , how can you use it in real life trading.


1. Look for opportunities to put bigger amount of capital per trade while managing risk

2. Strive to keep per trade loss as low as possible. It does not matter if you have lot of scratch trades you close immediately if they do not work

3. Focus on Stockbee Dollar breakouts, they offer you opportunity to risk bigger per trade.

4. Stop dreaming about doubling money in few trades (if that happens that is bonus, but you do not base your method on that if you are swing trader)

5. If you are holding 40 to 50 small positions, realistically look at the probability of you making big returns. It will be low. Mutual funds do that and that is why their returns suck.

Most importantly understand the maths of swing trading means having realistic assumptions about number of trades. Most active traders who make big returns yearly , do several trades and accumulate profits. Once in a while they find high probability idea and they bet more.


At the other spectrum you have some who take big positions and do few trades, both approach work. For this kind of approach to work you should have higher order stock selection skills, your timing has to be right, and willingness to seat through volatility.





Source: http://stockbee.blogspot.com/2020/02/how-many-trades-do-you-want-to-do.html


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