How important is the win percentage?

[tiddlywinks]

On 10 trades I'm fine taking 7 $50 stops so long as I make more than $350 on the other 3 trades.

Major overlook with this (microcosm) explanation/thinking... Trader does not get to choose the sequence of trade outcomes. How would you feel if you took 28 consecutive losers before you got 12 consecutive profit-conforming gainers? The trader does not get to choose the sequence of W/L.

WL Ratio is an important metric with the caveat volpri eluded too... depends on the type/style of trading. WL Ratio can give you an idea of validity on a particular setup or style of trading. Beyond that, WL ratio has little use without a complete understanding of (average?) win/loss amounts, not the WL ratio itself.

Much much better metrics to work with, better as in helpful to become a more consistently profitable trader are MFE and MAE... These are metrics that CAN be improved upon in different trading environments, which is a full 180 from the uncontrollable sequence of trade outcomes.

 

[USDJPY]

Glad it works for you. I do the opposite on all fronts. I scale in (average down) into losers, take quick profits, and maintain a high win rate.

But then I am a scalper. Win rate is very important, especially important, to a scalper of 1 to 8 points in say, the ES.

8 points is a very big scalp. Are you catching those big 1-minute candles like we had at 8:30 today or are you riding a scalp into a longer term trade?

 

[volpri]

As an example. 4 scalps this morning all winners. market going no where. All long scalps. Except the last on was an averaged down scalp.

 

[volpri]

8 points is a very big scalp. Are you catching those big 1-minute candles like we had at 8:30 today or are you riding a scalp into a longer term trade?

Actually in recent volatile markets I raised that to 12 points. I know it is different than how most define scalping but that is how I define it. I also call it "manual HFT trading." I trade off 5 minute charts and occasionally maybe off a 15 minute. It is rare but I will sometimes fine tune an entry on a 5 min chart with a 1 min chart.

 

[Trade Prophet]

Automated traders need to chime in here. Some of them do very well with ridiculously low win %. Necessary win % is dependent on the methodology structure.

Our win rate is 40%-45%, but the profit factor is above 2 thanks to position size management, this is how we are able to beat the market over the long run, add low commissions and a tight regime of buy stop, sell stop orders and that's basically it, no rocket science, just math + discipline

 

[p0box4]

Win percentage on its own is absolutely worthless.

A strategy with a +80% win rate can lose money and a strategy with a 20% win rate can make a very nice return.

 

[Trade Prophet]

Great topic, I was covering that in my room today.

Win percentage is totally irrelevant, all that matters is net profitability using scaling and tight stops.

It's my experience that nobody is consistently making over 50% winning trades, and if anyone claims they make 80% winning trades that's likely bs.

My most profitable months are ones with many small trades with position sizing.

I tell traders to think of my "30% Rule" which is 'how can you be profitable if you're right only 30% or less of the time in your trades?"

The answer is always to scale into winners, start small with tight stops, re-entries. On 10 trades I'm fine taking 7 $50 stops so long as I make more than $350 on the other 3 trades. That's the essence of successful trading -- lots of shots with tiny stops.

Agree, Same here, we run at around 40% win rate, but that's the last number I look at, some of our options strategy stand at... 20%! But when 1 out of 5 is a big winner, it covers the losers and then some.. When someone posts his (it's never hers, is it ) 95% win rate I smell a rat

 

[notagain]

Lower win% can cause longer losing streaks

 

[Trade Prophet]

Glad it works for you. I do the opposite on all fronts. I scale in (average down) into losers, take quick profits, and maintain a high win rate.

But then I am a scalper. Win rate is very important, especially important, to a scalper of 1 to 8 points in say, the ES.

I have to say that all the swing trading strategies I have tried with average down turned out losers, 85% win rate mind you, but these 15% losers killed the strategy

 

[Trade Prophet]

I really think that it needs to be greater than 50 percent for most traders. I say that because most traders have rather imperfect position management. Another factor is that for most trading systems the winners are not substantially larger than the losers.

I honestly think many retail traders don't even know their numbers and I agree the are probably at 50%,monitoring your track record for the numbers is crucial