Win rate worship

[Fairman]

Win rate worship

A high win rate is intoxicating. Seventy percent winners feels like mastery. On short timeframes, high win rates are easy to build, simply by taking small profits and giving losers room.

The arithmetic then does the damage. Ten winners of 1.5 pips and three losers of 6 pips leaves a net loss, despite a win rate above 75 percent. Add spread costs and it gets worse.

Traders with high win rates often resist changing, because each win feels like proof. A few bad losers erase weeks of work, but the memory of the wins remains stronger.

The honest measure is expectancy: average gain per trade after all costs. That number can be positive with a 40 percent win rate and negative with a 75 percent one.

Looking at the distribution of wins and losses, rather than just the count, changes how a strategy gets judged.

What is the actual expectancy per trade after costs, and how different is it from the win rate's suggestion?

[FXS Prop Desk]

Ten winners of 1.5 pips and three losers of 6 pips leaves a net loss, despite a win rate above 75 percent.

Ten winners of 1.5 and three losers of 6 gives plus 15 minus 18, so minus 3 pips before costs, on a 77 percent win rate. That example deserves to be pinned somewhere. The fix is rarely more winners. It is a smaller average loser.