Win rate

Win rate is the share of closed trades that end in profit: win rate = wins / total trades. A strategy that wins 60 out of 100 trades has a 60% win rate. It sounds straightforward, but win rate in isolation is nearly meaningless — it must be read alongside the average payoff ratio.

Example. Strategy A: 70% win rate, average win $100, average loss $300. Expectancy = 0.70 x $100 - 0.30 x $300 = $70 - $90 = -$20 per trade. Losing strategy. Strategy B: 30% win rate, average win $400, average loss $100. Expectancy = 0.30 x $400 - 0.70 x $100 = $120 - $70 = +$50 per trade. Winning strategy with a worse win rate.

Trend-following systems often run win rates below 40% and are still profitable because their winners are many times larger than their losers. Conversely, mean-reversion strategies can show 80%+ win rates while bleeding slowly from the occasional large loss.

See expectancy for the combined metric that accounts for both win rate and payoff size. Research output only — this is not investment advice.