Investing in the stock market doesn’t necessarily demand long-range planning. Some investors prefer to play the short game. 

Active trading strategies take advantage of short-term fluctuations in the price of individual stocks. By buying and selling these stocks within a brief window of time, investors can generate a profit. One of these methods is known as swing trading. 

Swing trading can be risky and will demand a great deal of time and attention. But for those with discipline, swing trading offers the promise of great rewards. Below, we’ll provide a brief analysis of swing trading, including the average income of a swing trader.

stock market chart

What is Swing Trading?

Swing trading attempts to take advantage of short-term gains in a stock that take place over the course of a few days or weeks. 

Swing trading demands a great deal of research and discipline, as swing traders have to analyze price trends and patterns in addition to using technical analysis to assess market picks. 

It’s technically possible for swing trades to be made on the same trading day, but this only happens in rare instances of extreme volatility.

How do swing traders identify profitable price fluctuations? The short-term nature of the trade demands careful analysis. Technical analysis can be helpful in evaluating stock trends that can affect the price of a particular stock, while fundamental analysis can provide additional data on broader trends that can influence share price.

Swing Trading vs. Day Trading

If this practice sounds a bit like day trading, it’s because both strategies represent short-term, active trading strategies. The largest difference is found in the time frame associated with each. 

Day traders will typically hold a particular position from a few hours to a few days at the most. Swing traders will maintain a stock position for days or even weeks, and in some rare cases, months.

This makes day trading a bit more intense than swing trading. Day traders will often need to commit all of their time and attention to the research and trading process, making day trading a full-time job. 

And because of the short-term nature of the trades, day traders rely on trading software or tools, while swing trading can be accomplished through a traditional brokerage account.

Raymond Rondeau, the president of the New England American Association of Individual Investors chapter, suggests that swing trading could be a more reliable strategy compared to day trading.

Day trading, he says, is “like playing speed chess, with limited time to determine your next move.” Swing trading, on the other hand, can be accomplished by “spending an hour or so on the weekend, over a cup of coffee, looking over a filtered list of stocks that meet their criteria, such as those from AAII’s Stock Investor Pro stock screening and research software, and reviewing them for strong technical setups.”

stock market chart

Is Swing Trading Profitable?

Many of the advantages of swing trading relate to the relative simplicity of this strategy, at least compared to the more time-intensive day trading approach we’ve described above. 

But the greatest promise of swing trading is that it can allow traders to take advantage of short-term fluctuations in the market, which can translate into big profits for the right investor. Swing trading is therefore very profitable for those who can commit to the process.

The Risks of Swing Trading

Like any active investing strategy, there are some risks involved with swing trading that should not be ignored.

First, swing trading can leave you vulnerable to overnight and weekend risks. When this happens, the price of a stock could be radically different when the trading session opens the following day, which could negatively impact your position.

Second, swing traders can be so focused on short-term gains that they miss out on the long-term success of a given stock. In other words, rather than selling a stock when it seems momentarily profitable, it may sometimes be wiser to hold onto a stock for long-term gains.

Finally, anytime you invest in individual stocks (especially for the short-term), you expose yourself to the risks associated with a volatile market. While experienced investors may be able to navigate the market successfully, newer investors may struggle to keep up and might even incur substantial losses.

The Average Swing Trader Salary in 2021

How much can you make swing trading? That is, after all, the bottom line! 

According to the employment website ZipRecruiter, the nationwide average income of a swing trader is $71,804 per year. But calculations get tricky because this salary depends entirely on your skill level, the market itself, and the hours you plan to invest. Some enjoy a swing trader salary as high as $174,000 annually, while others barely clear $20,000.

Is swing trading profitable enough to make your full-time job? Possibly, but again, this will depend largely on your skill level and time commitment. 

How much can you make swing trading part-time? For the part-time swing trader, you can expect to receive roughly $1,000 to $5,000 per month, depending on just how invested you are in the process. These profits are nothing to sneeze at, which means they could be used as supplemental income.

The Bottom Line: Is Swing Trading Right for You?

Generally speaking, new investors should focus on building a diversified portfolio and commit to long-range investing. But that’s not to discourage investors from becoming more familiar with the right research tools to make active trading strategies a part of their financial plans!

Earlier, we cited Raymond Rondeau’s recommendation that swing traders spend an hour or so on the weekend doing research over a cup of coffee. This may be as good a place as any to begin. Investors who are looking for a source of side income may take advantage of changing stock positions to generate a small profit.

couple looking at stocks

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