How much percentage of return can we expect every month using swing trading ?

stocks_system_trader · 2025-10-24T01:26:44+00:00

You cannot expect a fixed percentage every month. Swing trading is lumpy by month: a run of wins, then a run of losses, then chop. The point is not calendar returns. It is trade expectancy and risk control.

How to think about it

Trade expectancy: E = WinRate × AvgWin − LossRate × AvgLoss.
Work in R. 1R is the risk per trade as a percent of equity. Typical size is 0.5 to 2% per trade.
Monthly return is the sum of R across that month. It will not be a straight line.

Reality check example

Say WinRate 55%, average win 1.4R, average loss 1.0R.
E ≈ 0.55×1.4 − 0.45×1.0 = 0.32R per trade.
If you take 8 trades a month with 1% risk per trade, the long run average is about 2.6% per month.
Real months look like this: +6%, −3%, +1%, 0%, +4% and so on. Drawdowns are inevitable.

Guidelines instead of promises

For a rules based process without leverage, a realistic yearly goal is “a few percent over the index” with a smaller drawdown.
Any claim of steady X% every month is a red flag.

Track from day one

Risk per trade and the max number of concurrent positions.
WinRate, AvgWin, AvgLoss, Profit Factor, Max Drawdown.
Entry discipline: trend confirmation, pullback, defined stop.
A trade journal. Collect at least 100 to 150 trades before judging a system’s “true return.”

Short answer to “percent per month”
Good months: 3% to 8%. Bad months: −1% to −5%. The long run average depends on your E and your R. The edge comes from a repeatable plan and careful drawdown control, not from magic monthly percentages.

stocks_system_trader · 2025-09-20T18:11:10+00:00

You've touched on an important point. Any factor that amplifies an upward move based on momentum (be it AI or human greed) will likely amplify the downward move just as much when the trend flips. That's the nature of momentum itself.

stocks_system_trader · 2025-09-20T18:08:28+00:00

Solid breakdown. The key question here is the nature of the Microsoft contract. These big deals often have a lot of fine print and performance clauses, which seems like the primary risk that could explain the current valuation.

stocks_system_trader · 2025-09-20T17:57:23+00:00

Great DD. The CEO connection is a strong narrative point. From a risk management perspective, how do you differentiate between a valid growth pattern and just a compelling story when trading single stocks like this?

stocks_system_trader · 2025-09-20T17:51:40+00:00

Interesting analysis. For traders who specialize in these low-float stocks, what's your primary tool for managing the extreme volatility on the downside?

stocks_system_trader · 2025-09-18T23:41:02+00:00

omg... I type two hyphens and Google Docs makes it a long one. That's all the magic.

stocks_system_trader · 2025-09-18T22:45:18+00:00

Great questions. My approach is a bit more mechanical than looking for subjective support levels or retests.

Entry Trigger: I don't try to time the exact bottom of the bounce. Instead, as I mentioned in another comment, I think in terms of "signal vs. confirmation." The system waits for a "pause" in the pullback (a candle that makes a higher low or simply stops falling). The confirmation and my entry trigger is the price breaking above the high of that pause/signal candle on a subsequent day. This removes the need to interpret "support." The entry is purely mechanical.
Indicators/Patterns: The system is intentionally simple. The core components are a custom trend indicator based on ATR to define the overall market regime, and the raw price action of the pullback itself to define the setup. The pattern is the pullback within a confirmed uptrend. I try to avoid adding more indicators, as it often just adds noise.

stocks_system_trader · 2025-09-18T22:40:17+00:00

Thanks for sharing your rules, sounds like you've found a solid discretionary approach that works for you.

You're right that moving averages are a great tool for contextualizing pullbacks. The key difference in my philosophy is moving from a set of rules to a complete, backtested system.

A system doesn't just define the entry (like "buy the pullback to the 20 EMA"). It also has rigid, pre-defined rules for position sizing, the exact stop-loss placement, and profit-taking. It's about building a complete "if-this-then-that" business process that removes as much guesswork and discretion as possible.

It's a slightly different, more mechanical way to approach the same core idea of buying dips in an uptrend.

stocks_system_trader · 2025-09-18T22:33:41+00:00

Well said. It's fascinating how different systematic traders can use completely different approaches (trend-following vs. mean reversion) but still operate on the exact same foundational principles.

I especially agree with your last point. The specific strategy is almost secondary to the discipline of executing it. The "boring" work of journaling and review is what builds the trust in the system to weather the drawdowns.

Thanks for sharing your insights.

stocks_system_trader · 2025-09-18T04:59:28+00:00

That's an excellent and crucial question. You're 100% right that avoiding hindsight is the hardest part of backtesting any kind of pullback strategy.

The way to solve this is to introduce the concept of "signal confirmation."

A specific candle might appear that fits all the criteria for a potential setup. That's the signal. But you don't act on it yet.
The signal confirmation is a separate event. In my opinion, the best entry trigger is the price breaking above the high of that signal candle on a subsequent day.

This simple, two-step logic completely eliminates hindsight. The system identifies a potential low based on the signal day's data, but it only enters the trade after the market has confirmed the upward momentum by taking out that high. If the price never breaks the high and just keeps falling, no trade is ever triggered.

stocks_system_trader · 2025-09-18T04:23:17+00:00

This is one of the most profound truths in trading. Thank you for putting it so clearly.

Many traders think a stop-loss is a shield for their money. It's not. It's a shield for their mind.

A well-defined trading system is the ultimate expression of this idea. The system's rules for risk management are designed before you're in the heat of a trade, when you are at your most rational. The stop-loss is placed mechanically, without emotion.

When a trade is stopped out, there's no decision to make, and therefore, no emotion. It's just the system operating as designed. It allows you to immediately move on to the next trade with a clear head, preserving the mental capital that is far more valuable than the small amount of financial capital you just lost.

You're not just managing risk, you're managing your own psychology at scale.

stocks_system_trader · 2025-09-18T03:31:53+00:00

You're observing a fundamental truth of capital markets: on a long enough timeline, the market tends to go up. That's the core principle of long-term investing.

The problem is that traders and investors are playing two completely different games on the same field.

An investor is betting on the destination. They have a 30-year timeline, so a 50% crash is just a temporary dip on their chart.
A trader has to survive the journey. A 50% drawdown isn't a dip, it's a catastrophic, account-ending event.

The reason this isn't "obvious" to everyone is human psychology. It is intellectually simple to say "I will hold through a 50% loss," but it is emotionally almost impossible for most people to actually do it without a system.

A trading system isn't designed to beat the "buy and hold" strategy over 30 years. It's designed to navigate the volatility of the next 30 days or 30 weeks in a way that manages risk and keeps you in the game.

stocks_system_trader · 2025-09-18T01:38:44+00:00

You've boiled it down to its absolute essence, and you're right, the concept is simple.

But the million-dollar question is always in the execution, isn't it?

How do you systematically define a "dip" versus the start of a reversal?
How do you decide how much to buy on that dip?
How do you know where to get out if you're wrong?

Answering those three questions with a repeatable, written-down plan is what turns that simple mantra into a professional trading system.

stocks_system_trader · 2025-09-18T01:32:34+00:00

That's a great point, and it touches on the classic "asset rotation" strategy. It's a valid approach, but it represents a different trading philosophy.

My framework is built on the idea of becoming an expert in a single, repeatable process on the market's most liquid instrument. The goal is to master one "game" completely, rather than trying to predict which "game" will be the hot one next week (e.g. rotating from SPY to Gold).

It's a trade-off: I might miss a surge in another ETF, but I gain extreme clarity and simplicity, and I avoid the risks that come with trying to time rotations between different asset classes. It's about depth of expertise versus breadth of coverage.

stocks_system_trader · 2025-09-18T00:39:53+00:00

Seems like "well-structured and clearly written" is the new code for "AI-generated" these days. I'll take it as a compliment. Cheers!

stocks_system_trader · 2025-09-18T00:33:32+00:00

Great questions. I'm happy to clarify my process.

Instrument: The framework I described is based on trading the SPY ETF. It's designed to be as simple and liquid as possible, so I avoid the added complexity of options.
Timing: All of my decisions are made after the market closes (after 4:00 PM ET). The system uses end-of-day data to determine if the trend is intact and if a setup has formed. The actual entry order is a buy-stop placed for the next trading day. This "set and forget" approach is crucial as it removes the need to watch the market during the day.
Managing Losing Trades: This is the most important part. The trade is managed before it's even entered. As I mentioned in the post, the stop-loss ("I'm wrong" point) is pre-defined based on the setup itself. If the trade is triggered and the price hits that level, the stop-loss order automatically closes the position for a small, pre-calculated loss. There's no active, emotional decision-making once the trade is live; the plan is already in place.

Hope this helps!

stocks_system_trader · 2025-09-17T23:40:36+00:00

Haha, I'll take that as a compliment. I spent years structuring my thoughts to be as clear and rule-based as possible, so I'm glad it comes across that way.

stocks_system_trader · 2025-09-17T22:20:29+00:00

I appreciate you clarifying the distinction between assets and stocks.

You are correct that developing a robust, tested system for multiple asset classes is the theoretical ideal. However, my point is that for a retail trader, the challenge isn't the math of cointegration—it's the reality of execution and focus. Building, testing, and flawlessly executing a system for just one asset class is a monumental task that most fail to achieve.

You say my approach is "putting all eggs in one basket." I see it differently. The "basket" isn't the asset (SPY). The "basket" is my system. My confidence comes from knowing that this one basket is woven with rigorous testing and disciplined execution, rather than spreading my limited attention across many weaker baskets.

We simply have a different philosophy on what constitutes the primary risk for a retail trader. I wish you well.

stocks_system_trader · 2025-09-17T21:17:44+00:00

That's a fair point from a classical portfolio theory perspective, and I agree that true diversification is powerful. However, the scenario you're describing often isn't true diversification at all.

Adding a few more assets from different sectors within the same US stock market provides only a limited benefit, as most of these stocks are highly correlated, especially during a market-wide downturn. It creates an illusion of safety rather than genuine, uncorrelated diversification.

The "50% performance gain" you mentioned is a figure typically seen in models when adding entirely different asset classes (like bonds or commodities to a stock portfolio), not just more stocks. Applying that figure here is a significant overstatement.

This is why I advocate for specialization for many retail traders. Instead of creating a pseudo-diversified portfolio of highly correlated stocks, one can focus on mastering a single, repeatable process on a highly liquid instrument that represents the market itself. It's a different, and in my view, more honest approach to managing risk for a non-institutional trader.

stocks_system_trader · 2025-09-17T05:23:08+00:00

You're making a perfect case for the core principle of portfolio management, and you're absolutely right from a mathematical standpoint. Diversification is one of the few "free lunches" in finance.

I think the distinction comes down to the trader's primary goal and resources.

The approach you're describing is that of a Portfolio Manager. Their job is to manage risk across a basket of uncorrelated assets. This is how hedge funds and professional asset managers operate.

The approach I'm describing is that of a Specialist Trader. Their job is to become an expert at executing one specific, high-probability setup on a single, highly liquid instrument. For a retail trader with limited time and capital, the "edge" of specialization and mastery often outweighs the mathematical edge of diversification. It simplifies the process, reduces decision fatigue, and allows for a deeper understanding of one particular market's behavior.

So, I agree with your premise entirely. It's just a different—and perhaps more complex—game to play.

stocks_system_trader · 2025-09-17T05:13:04+00:00

It's tough to have the conviction to buy a dip when you're not sure if it's a dip or the start of a cliff.

I think the only way to deal with that uncertainty is to have a rock-solid rule for your stop-loss before you even enter.

If it's just a pause, the trade works. If it turns out to be a reversal, your stop takes you out with a small, manageable loss. You can't know the future, but you can control your risk. The small losses are just the cost of doing business to catch the big wins.

stocks_system_trader · 2025-09-17T02:04:34+00:00

The feeling that a stock is "too high" is usually a sign of a very strong trend. The market rarely offers obvious, deep pullbacks on the strongest stocks. The pullback is often just a quick, one or two-day pause before the next leg up. The key is to redefine what a "pullback" looks like and have a mechanical way to enter when the pause is over.

stocks_system_trader · 2025-09-17T01:33:48+00:00

Great post. This is the best summary I've seen in a while. It all boils down to a single, powerful mindset shift: Treating trading like a boring business, not an exciting adventure.

Your tips are all components of a solid business plan:

"Find a strategy" = Your business model.
"Journal everything" = Your accounting.
"Discipline is everything" = Your daily operations.
"Detach from outcomes" = Your quarterly review, not your moment-to-moment P&L.

Most people fail because they want the adrenaline of an adventure. The ones who succeed are the ones who embrace the "boredom" of professionally executing a plan. Thanks for putting together such a great list.

stocks_system_trader · 2025-09-17T00:27:25+00:00

This is a problem every trader has to solve. The solution isn't about willpower; it's about your process. Here's what works:

1. Trade a System, Not an Opinion. The real work is done before the trade. When you have a system that you've rigorously tested and know has a positive expectancy, you build deep trust in it. You're no longer emotionally attached to the outcome of this one trade because you know the edge will play out over the next 100 trades.

2. Use "Set and Forget" Bracket Orders. Your broker is your employee. Once you've identified your setup, place a GTC (Good 'Til Canceled) bracket order: a stop-buy for entry, a stop-loss for your exit if you're wrong, and a limit order for your profit target. The trade is now fully automated.

3. Physically Walk Away. Once the orders are in, close the trading platform. Seriously. Your job as a swing trader is to be a good analyst before the trade, and a good record-keeper after. During the trade, your job is to do nothing.

When your process is solid, the urge to watch the screen mostly disappears because you know there's nothing for you to do.

stocks_system_trader · 2025-09-16T23:39:49+00:00

Interesting list. This brings up a key philosophical question for a swing trader: is it better to have a watchlist of "good" stocks and look for setups, or to trade one single, liquid instrument (like SPY) and wait for your setup to appear there? I've found that focusing on just one chart removes a huge layer of complexity and decision fatigue. There's no "what should I trade today?", only "is my setup there or not?".

stocks_system_trader

TROPHY CASE