Saturday, September 23rd, 2017

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profit on swing trading?


can you help me understand how to profit from swing trading (purchase stock and hold for a short term then sell)

When I purchase and when I sell stock, I’ll incur a broker’s fees.
I’ll also incur a short term tax at the end of the year for any short term capital gains.

So do I need to make 1% on each sale or 10% or 50% in order to show a net profit?

Also to calculate an annual profit, do I simply add the profits from each transactions?

Hi Agent and thanks…..
Broker fees are $7 from Scottrade…..
so basically I need to make more than $7 to get ahead……..
what I’m struggling with is comparing buy and hold vs swing trading………is for example 1% gain every week equivalent to 52% gain over a year (not including compounding)


2 Responses to “profit on swing trading?”
  1. agent4927 says:

    It depends on the size of the deal. Brokers fees are minimal, but obviously you need to have position big enough to make those fees worth paying.

    E.g. A 2k deal with a 10% return might incur brokerage fees of $20, thus reducing the net return to 8%. However a 20k deal with a 10% return would still only incur broker fees of $20, so the net return would be 9.9%.

    To calculate an annual profit you should more than likely reinvest the profits from each transaction, that is assuming you make a profit each time and compound this by the number of transactions you plan to make over the course of the year. Then take away the tax you need to pay on the annual total profits on your initial investment you think you will make.

    You need only need to make a profit in single digits for this to be profitable, but again without knowing the amount of capital you intend to invest it is impossible to give you an accurate answer to this question.

  2. Stock Trading Warrior says:

    Great example of trading expense calculation above.

    Another perspective is you have to decide how much time you want to spend trading. Traditionally, swing trading will require more time (some time each day) versus buy and hold (once a week or less).

    Taxes are taxes and not necessarily a reason to choose one stock method over another. There are expenses that go along with trading, the key is to keep increasing your trading capital to dilute those expenses and aim to gain a nice percentage above the expenses.

    You can total up the profit and loss from each transaction and then subtract the commission expense. BTW, the expense will be $14 because there’s a fee to sell as well as buy. It’s good to keep track of trades and see how you’re doing compared to the general market percentages and also whatever goals you have for profits. That way you’re gauging your process and your strategies too.

    The 1% per week calculation is correct at 52%. The problem is as easy as 1% a week sounds, it isn’t because some weeks will be a loss. However, as I said if you’re monitoring your trades and tightening up systems and strategies your success rate will improve.

    You’re definitely thinking along the right lines in analyzing your strategies. Sounds like the main thing now is to decided how much time you want to spend trading (and that can change if one way doesn’t work for you – that’s one of the beauties of learning how to trade).

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