Lessons › Why traders lose › Win rate is a trap
World 11 · Why traders lose · lesson 12 · level 2
Win rate is a trap
A win rate means nothing alone: the bigger your wins are compared with your losses, the fewer wins you need.
In one line
A trader who wins 80% of the time can still lose money.
Explained simply
Your win rate is the share of trades you win. Alone, it tells you little. Say you win 80 of 100 trades at $1 each and lose 20 at $5 each: $80 in, $100 out. You won most and still lost. So pair it with reward to risk, what a win pays compared with what a loss costs. When a win pays 1.5 times the loss, you must win 40% just to end at zero, before fees. In our library of 1,814 real trade plans from chart patterns, only 33% reached the planned profit price first.
A worked example
An example of 100 trades: 80 wins × $1 = +$80, and 20 losses × $5 = −$100. Result: −$20, even though 80% of the trades won.
Mistakes to avoid
- Judging your trading by win rate alone.
- Taking many small wins while letting a few losses grow big.
- Forgetting that break-even win rates are before fees: fees push them higher.
Check yourself
What is a win rate?
The share of trades you win. It is how often you win. It says nothing about how much a win pays or a loss costs.
You win 80 of 100 trades at $1 each and lose 20 at $5 each. What is the result?
−$20. 80 × $1 = $80 in and 20 × $5 = $100 out. You won most of the trades and still lost $20.
Your wins get bigger compared with your losses. What happens to the win rate you need?
It goes down. The bigger the wins, the fewer you need: 50% at 1 to 1, 40% at 1.5 to 1, 33.3% at 2 to 1, 25% at 3 to 1.
Each win pays $3 and each loss costs $1. What win rate do you need to break even, before fees?
25%. That is 3 to 1. Win 25 of 100: 25 × $3 = $75 in, 75 × $1 = $75 out, so you end at zero.
Our real setups paid 1.5 to 1, and 33% reached the planned profit price first. What does that mean?
7 points short of the 40% needed. At 1.5 to 1 you must win 40% just to end at zero. 33% is 7 points short, before a single fee.
Goal of this lesson: Find the win rate you need to break even from your reward to risk.