Examples: Swing Trades

A swing trade is a trade you hold for days or weeks instead of minutes or hours. You buy, you go to sleep, you wake up, and you are still in the trade. That one fact — sleeping while you own something — changes everything about the risk, and it is why swing trades deserve their own set of worked examples.

These are worked educational examples with realistic prices, built to teach the math and the decision-making — they are not records of anyone's actual trades. No real company is being described, and no real person's account is shown. The prices, share counts, and dollars are invented, but the arithmetic is real, and every number below is checked: shares times price difference always equals the profit or loss stated.

All four examples use the same trader with the same account: $25,000, risking 1% per trade. One percent of $25,000 is $250, so every plan below is built to lose about $250 if the trade fails. That unit has a name traders use constantly: R. One R is the amount you planned to lose on a trade. A trade that loses its planned amount is a −1R loss. A trade that makes three times the planned risk is a +3R win. R lets you compare trades of different sizes honestly, and you will see it used in every example.

Example 1 — The Clean Winner

The Setup. A large footwear and apparel company has been climbing steadily for months. The stock pulls back — a normal, healthy dip inside an uptrend — down to $80, a price level where buyers stepped in twice before. The trader's written plan says a pullback to a proven level, in a stock already moving up, is the kind of trade they take.

The Plan. Entry at $80. The stop-loss — an order placed in advance that automatically sells your shares if price falls to a set level, so the exit decision is made before emotion shows up — goes at $74, below the level where buyers stepped in before. If price reaches $74, the idea behind the trade is proven wrong, and the trader wants out. The target zone is $98, near the stock's previous high, where sellers showed up last time.

Risk per share: $80 − $74 = $6. Risk budget: $250. Shares: $250 ÷ $6 = 41.67, rounded down to 41 shares (you always round down — rounding up risks more than the plan allows). Planned risk: 41 × $6 = $246. Cost of the position: 41 × $80 = $3,280. Notice the difference: the trader controls $3,280 of stock but has only $246 at risk if the plan holds. Position size and risk are not the same number, and confusing them is how beginners blow up.

The reward side also checks out before entry: $98 − $80 = $18 of possible gain per share against $6 of risk — 3 dollars of potential reward for every 1 dollar of risk.

The Math. If the stop is hit: 41 shares × $6 = −$246 (−1R). If the target is hit: 41 × $18 = +$738 (+3R).

What Happened. The stock based quietly for a few days, then climbed — but not in a straight line. About a week in, the whole market had a bad day and the stock dipped to $76, just $2 above the stop. The trader did nothing, because nothing in the plan had changed: $76 is not $74, and a plan you abandon at the first uncomfortable moment is just a suggestion. The dip recovered within two days. Just under three weeks after entry the stock reached the $98 target zone. The trader sold there, at $98, exactly as the plan said — no holding out for $100 "just to see." Profit: 41 × ($98 − $80) = 41 × $18 = +$738, which is $738 ÷ $246 = exactly +3R. The account went from $25,000 to $25,738 — a gain of about 2.95% from one patient trade.

The Lesson. Nothing about this win was improvised. The entry, the exit-if-wrong, and the exit-if-right were all decided before the first dollar moved, and the size came from the stop distance, not from how confident the trader felt. Also notice what did not happen: the trader did not move the target higher mid-trade out of greed. A plan you keep editing is not a plan.

Example 2 — The Loser Cut Right

The Setup. A national home-improvement retailer has traded sideways in a flat range for two months. It pushes above the top of that range to $95, and the trader buys, planning for the breakout to carry higher.

The Plan. Entry at $95. Stop at $85, back below the range — if price is there, the breakout has clearly failed. Risk per share: $95 − $85 = $10. Shares: $250 ÷ $10 = 25 shares exactly. Planned risk: 25 × $10 = $250. Cost: 25 × $95 = $2,375. The target zone was $125, which would have been 25 × $30 = +$750, another 3-to-1 plan.

The Math. Stop hit: 25 × $10 = −$250 (−1R). Target hit: 25 × $30 = +$750 (+3R).

What Happened. The breakout never got going. The stock sagged for four straight days and touched $85 on day four. The stop-loss order filled at $85 in a normal, orderly market — the stock was trading actively, so the sell went through right at the planned price. Loss: 25 × ($85 − $95) = −$250, exactly −1R. The account went from $25,000 to $24,750. The trader wrote three lines in the journal — setup, result, "plan followed" — and was done thinking about it by dinner.

One more thing happened, weeks later: the stock kept sliding and eventually traded at $71. The stop the trader obeyed had avoided a further 25 × ($85 − $71) = $350 of decline. But be careful with that fact, because it cuts the wrong way if you lean on it. The exit would have been correct even if the stock had turned around at $86 and run to $125 without him. You judge an exit by whether it followed the plan, never by what the price did afterward. Judging by afterward is hindsight, and hindsight will talk you out of every stop you ever set — right up until it talks you into an Example 3.

The Lesson. This is what a loss is supposed to look like: small, boring, and finished. A −1R loss is not the plan failing. It is the plan. It is the rent you pay for the chance at +3R wins like Example 1. At −1R per trade, you could lose ten trades in a row and still have about 90% of your account. Losing trades only become dangerous when a trader refuses to take the small one — which is exactly the next example.

Example 3 — The Same Loser, Held Wrong

The Setup. Same stock. Same range breakout. Same entry at $95, same stop at $85, same 25 shares, same $250 of planned risk as Example 2. This is not a different trade. It is the same trade, with one different decision on day four.

The Plan. The plan was identical — and then, on day four, with the stock sitting on the stop, the trader cancelled it. The reasoning sounded smart: "The company is solid. The thesis is still good. This is just a shakeout. Selling here would be stupid." Every trader who has ever held a loser too long has said some version of those exact sentences.

The Math. Planned loss at the stop: −$250 (−1R). What actually happened, below.

What Happened. The stock slipped through the high 80s, then the low 80s. A two-day bounce back toward $88 felt like proof the thesis was right — it was just a bounce inside a downtrend, and it faded. Over about five weeks the stock ground down through the 70s and the 60s. There was no single disaster day; there were just twenty-some small red days, each one easy to excuse. Finally, exhausted and down far more than ever intended, the trader sold at $58.

Loss per share: $95 − $58 = $37. Total loss: 25 × $37 = −$925. In R: $925 ÷ $250 = −3.7R. The account fell to $24,075 — a 3.7% drawdown from one trade that was designed to cost 1%.

Now count the full damage, because the $925 is only the first layer:

• The extra loss: $925 − $250 = $675 beyond the plan — that is 2.7 additional planned risks burned on one decision.
• The recovery math: from $24,750 (the Example 2 outcome), getting back to $25,000 needs a gain of about 1.01%. From $24,075, it needs about 3.84%. Losses get harder to recover from the deeper they go — one reason the loss-recovery table elsewhere in this Academy matters so much.
• The winner it erased: Example 1's clean, patient, three-week win made $738. This one lapse cost $925 — the entire winner, plus $187 more, gone.
• The opportunity cost: for five weeks, the trader's money, attention, and risk budget were tied up nursing a broken trade. Two later setups that matched the written plan came and went untaken, because the trader was already "in something" and watching it bleed. A trapped trader cannot take new trades.

The Lesson. The market does not know your thesis, and it does not grade on effort or conviction. A stop-loss is not a prediction that the stock will keep falling — it is a pre-commitment about how much one idea is allowed to cost you. The cheapest loss is always the first one. In Example 2 the trader paid $250 to find out the idea was wrong. In Example 3 the trader paid $925 to find out the exact same thing.

Example 4 — The Earnings Gap

The Setup. A big industrial manufacturer trades at $100. The trader enters a swing at $100 with a stop at $92. Risk per share: $100 − $92 = $8. Shares: $250 ÷ $8 = 31.25, rounded down to 31 shares. Planned risk: 31 × $8 = $248. Cost: 31 × $100 = $3,100.

One fact sat on the calendar the whole time: the company reports earnings — its scheduled quarterly report card of profits and sales — in three days. Earnings dates are public, announced weeks ahead. There is nothing hidden about them.

The Plan. The trader saw the earnings date and made a choice: hold through the report at full size, because "the numbers will probably be fine." Understand precisely what was wrong with that choice. Holding through earnings is not automatically a sin. The sin was holding at a size that assumed the stop would protect the full $248 plan. A stop protects you while the market is open and trading. It cannot protect you overnight.

The Math. Planned loss if the stop fills normally: 31 × $8 = −$248 (−1R). Now the math of a gap — when a stock's first trade of the day happens far from yesterday's closing price, because news arrived while the market was closed: the stock closed at $100, the report disappointed, and the next morning's first trade was at $88. That is a −12% gap ($100 × 0.88 = $88).

What Happened. At the open, the price was $88 — already below the $92 stop. A stop-loss works like this: when price trades at or through your stop level, your order becomes a regular sell order at the best available price. It is a trigger, not a guaranteed price. Since the stock opened at $88 and never traded at $92 that morning, the trader's shares sold at about $88.

Actual loss per share: $100 − $88 = $12. Total: 31 × $12 = −$372. In R: $372 ÷ $248 = −1.5R — half again the planned risk, $124 more than the plan allowed, lost before the trader's first cup of coffee.

The Lesson. There was a framework available before the report, and it has three honest options. Any of them is defensible. "Full size and hope" is not one of them:

• Exit before the report. Sell the day before earnings, watch the reaction with no money at risk, and re-enter afterward if the setup still qualifies. You give up the chance of a happy gap up. You also give up nights like this one.
• Shrink the size to fit the gap, not the stop. Decide the worst realistic gap — say 15% on a $100 stock, or $15 per share — and size for that: $250 ÷ $15 = 16.6, rounded down to 16 shares. Then this exact −12% gap costs 16 × $12 = $192, safely inside the $250 budget. The stop still sits at $92 for ordinary trading days; the size is what protects you from the extraordinary one.
• Hold full size with open eyes. Accept — in writing, in the journal, before the report — that the real risk on this trade is roughly 1.5R to 2R, not 1R, and that you are knowingly treating the earnings announcement as a coin flip you can afford. If you cannot write that sentence honestly, you do not actually accept it, and one of the first two options is yours.

The deepest point: a gap loss on a random overnight news story is bad luck. A gap loss through a scheduled earnings report is a planning failure. The date was on the calendar the day the trade was placed.

And yes — gaps cut both ways. If the report had thrilled everyone, the stock might have opened at $112 instead, a +12% gap, and the same 31 shares would have gained 31 × $12 = +$372 overnight. That is exactly what makes holding through earnings so tempting, and it changes nothing about the planning. A coin flip that sometimes pays you is still a coin flip. The question is never "could this gap go my way?" — it is "have I sized this trade so the bad flip fits my risk budget?" If the answer is no, the good flip is just bait. Two habits prevent nearly all of this: check the earnings date before you enter any single-stock swing (it takes thirty seconds), and if a report lands inside your holding window, make the exit-or-shrink decision that day, in writing — not the night of the report, with the headline already scaring you.

The Scoreboard

What These Examples Teach

• Position size comes from the stop distance, never from confidence. Every example divided the same $250 budget by the distance to the stop. Example 1 risked $246 on 41 shares; Example 2 risked $250 on 25. The share count changed. The risk did not.
• Plan in R, judge in R. R strips away the dollar size of any one trade and shows you the truth: +3R, −1R, −3.7R, −1.5R. A trader whose losers average −1R and whose winners average +3R can be wrong more often than right and still grow.
• A −1R loss is the system working. Example 2's trader lost money and made zero mistakes. Losses are a cost of doing business — but only when they stay the size you pre-decided.
• Discipline, not the market, sets your worst loss. Examples 2 and 3 were the same trade. The market offered both traders the identical exit at $85. One took it and lost $250; the other argued, hoped, and lost $925. The $675 difference was a decision.
• One undisciplined loss can erase a clean win. Example 3's −$925 swallowed Example 1's entire +$738 winner and $187 more. Protecting winners means capping losers — they are the same job.
• A stop is a trigger, not a guaranteed price. In an open, orderly market it fills near your level (Example 2). Across an overnight gap it fills at the open (Example 4). Never build a plan that assumes a stop can do what it cannot.
• Earnings dates are landmines with a published schedule. Check the calendar before entering any single-stock swing. Before a report, choose on purpose: exit, shrink to gap-size, or knowingly accept 1.5–2R of real risk.
• The space between is where trading is actually decided. Winners are rarely heroic and good losers are always boring. Almost everything that separates Example 2 from Example 3 happened in the quiet minutes when a plan met an emotion.