Is 5% on a swing trade good?

Warren Buffet, the notable stock market guru, advises investors never to dream of more than a 30 percent return on their capital and it will double in 3 years.

He is often referred to as the ‘Oracle of Ohama’ which means that he was born in Ohama and is coined as the best financial investor in the International Stock Markets.

Now the question is, can I earn 5 percent profit every month and the answer is yes.

If you trade carefully you can earn somewhere between 10 percent to 50 percent annually.

Note:

You must remember that your stocks will witness an involvement in several trading sessions, and for each trade you will be levied trading fees and other relevant fees.

Hence the level of profits at the end of a year automatically declines.

How to Earn 5% on Swing Trade

You can make profits on the price swings experienced by your underlying assets in the stock markets.

By utilizing the swing trading stategies you can make money on your assets, equity, commodities, and currencies.

Fundamentally, the swing trades are short-term. You can yield good returns by holding your positions for a short period, say, for days to a few weeks.

You can improve your profit levels by adding small amounts of returns in buying and selling trades.

You can enter into higher risk zones when trading, such as reversal against the last open markets then you need to act instantly and exit their positions.

Limitations in Swing Trading:

Although you cannot invest a small amount in swing trades and expect huge returns, still you must always follow the thumb rule.

Never trade stocks whose value is more than 1 percent of your trading capital. For instance,

If your trading capital is INR 1000.00 and you plan to buy a stock priced at INR 500.00 to INR 600.00 and after setting a stop loss of 10 percent below the entry price you will be risking 5 percent of your trading capital.

Since 10 percent of INR 500.00 is INR 50.00. Hence, the value of impending loss is more than 1 percent to 3 percent.

In such situations, you must buy stock of lower value, say, INR 100.00 to INR 200.00. Then on applying a stop loss of 10 percent, you will be losing 1 percent to 2 percent of your trading capital. Therefore, to buy a stock of higher value your trading capital must run high.

Ideally, if you are able to make a profit of five percent on your investment every week then in four working weeks you will have done 20 percent of business on your investment.

Risks Involved in Swing Trading:

You can witness price gaps when your bought stocks experience overnight and weekend market risks.

You may not be able to identify the right, accurate, and consistent performance of the stocks and hence the inability to set the right timing can lead to losses.

In a rush, to obtain the short-term market moves in the swing trade, you may unintentionally skip the long-term trends or exceptions stocks.