Case Study, Leila: A Win Rate of Eighty Percent and a Slowly Shrinking Account

[Fairman]

Case Study, Leila: A Win Rate of Eighty Percent and a Slowly Shrinking Account

Leila is a composite character, not a real person, built from patterns common among retail traders. She wins 80 percent of her trades, averaging 6 pips per win. She loses the rest, averaging 40 pips per loss, because she moves her stop when price approaches it. She trades 0.5 lots, and pays a 1.2-pip spread.

Compute her expectancy. Winners: 0.8 times 6 is 4.8 pips. Losers: 0.2 times 40 is 8.0 pips. Net: minus 3.2 pips per trade before the spread, and minus 4.4 after.

In dollars at 5 dollars per pip: minus 22 dollars per trade. At 40 trades a month, minus 880 dollars, on an account of 10,000, about 8.8 percent a month.

Why does she feel fine? Eight of ten trades win. The losses come rarely, but each wipes out about seven wins. A streak of ten wins in a row feels like skill, while the single loss afterward feels like bad luck.

Diagnosis. The problem is the exit behavior: small targets, with stops moved wider. The plan is structured as many small wins and rare large losses, the profile of a hidden-risk strategy.

Fix. A fixed stop at 15 pips, never moved. A target of 10 pips or more. At a 55 percent win rate, the expectancy becomes 0.55 times 10 minus 0.45 times 15, which is 5.5 minus 6.75, minus 1.25 pips, still negative. The setup needs a better ratio, which needs entries with real edge.

Lesson: the win rate means nothing without the payoff.

Exercise: compute the expectancy in pips for your own average win and loss.