Myth, You Need a High Win Rate to Make Money

[Fairman]

Myth, You Need a High Win Rate to Make Money

Many beginners judge a strategy by how often it wins. A system that wins 70% sounds great, and one that wins 40% sounds hopeless. But win rate alone says very little.

Consider two traders:

- Trader A wins 70% of trades, with an average win of 0.5R and an average loss of 1.5R. Expectancy: (0.7 x 0.5) - (0.3 x 1.5) = 0.35 - 0.45 = -0.10R per trade.
- Trader B wins 40% of trades, with an average win of 2.5R and an average loss of 1R. Expectancy: (0.4 x 2.5) - (0.6 x 1) = 1.0 - 0.6 = +0.40R per trade.

Trader B loses more often but earns more.

Why the myth persists:

- Winning feels good, and losing feels bad
- High win rates reduce emotional pain
- Marketing highlights accuracy

What matters more:

- Expectancy
- Average reward-to-risk
- Drawdown and consistency
- Whether you can stick with the system

Practical advice:

1. Track win rate, average win, and average loss together.
2. Don't cut winners short just to feel right more often.
3. Ensure your plan has a favorable reward-to-risk.
4. Consider your psychology: can you handle a 40% win rate with long losing streaks?

Choose a system whose pattern of wins and losses you can actually live with.

[Fairman]

Worked example to make it concrete. A 40 percent win rate where winners average 2.5R and losers 1R gives an expectancy of 0.4 times 2.5 minus 0.6, which is plus 0.4R per trade. A 70 percent win rate where winners average 0.5R and losers 1.5R is 0.35 minus 0.45, which is minus 0.1R. The second one feels better and loses money. The catch with the low win rate system is the losing streaks. At 40 percent, runs of six or seven losses in a row are normal over a few hundred trades. You need to be able to sit through those without changing anything, so size it small enough that the streaks feel boring rather than scary.

[Fairman]

Whenever someone shows off a 90% win rate, ask about the size of the losing trades. That's where the real story is. High win rate systems often hide the occasional loss that wipes out a month. The common pattern is tiny targets and very wide stops, or no stop at all with positions held until they come back. With a 90 percent win rate at 0.2R per win, one loss of 2R wipes out ten winners. Ask for the average win, average loss and max drawdown together. If someone only quotes the win rate, they're either hiding the rest or haven't calculated it.