How important is the win percentage?

volpri said:
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.
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Nerves of still, stay successful
 
Trade Prophet said:
How important is the win rate when trading stocks, futures or any other asset class?

If you lose more than 50% of the time, does that necessarily means that the strategy is a losing strategy?

https://www.alphaoverbeta.net/blog/
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The issue is not just the strategy itself...its the entire trading plan.

Thus, you can have a strategy that loses 50% (wins 50%) but if its within a trading plan that's able to exploit the wins for example keeping the losing trades small and the winning trades big...

Thus, we had an ET member with like +70% winners but overall he lost money. In fact, he blew up (margin call) because he allowed his losing trades to be huge losers until the final one was a loser he couldn't return back from.

He didn't believe in using stops.

Therefore, if your trading plan involves minimizing the losses in the losing trades while allowing the winners to run their course to profit targets...you essentially have a winning trading plan with a questionable trade strategy.

Regardless, win/loss ratio is still an important statistic to maintain with other important statistics.

wrbtrader
 
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Trade Prophet said:
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
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:thumbsup::thumbsup::thumbsup:

My win rate has been < 40% on average going all the way back to 2013 when I started trading options full time. :(
 
Trade Prophet said:
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
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What instruments and what underlying do you trade?
 
This is a brilliant thread, thx to all for posting,, and OP for bringing it up. It's so important. Really wish I knew all this 20 years ago.

You guys are all making great points.

Truth is there's no single correct answer, it depends on individual trading styles.

Perfect analogy is winning poker players, world champions like Ivey, Esfandiari and Negreanu all play uniquely.

There's a few things we can likely all agree on like avoiding big stops. Super insights, valuable tips, thx
 
tiddlywinks said:
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.
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I agree completely on the average loss /average win issue, that's what I tried to explain in the article provided in the link at the primary post, regarding MAE & MFE I never really saw these as major contribution to my understanding of a trading strategy but maybe I'm missing something here, I would love to hear how these risk metrics contribute to your understanding and how you use them to improve a trading strategy, thanks
 
wrbtrader said:
The issue is not just the strategy itself...its the entire trading plan.

Thus, you can have a strategy that loses 50% (wins 50%) but if its within a trading plan that's able to exploit the wins for example keeping the losing trades small and the winning trades big...

Thus, we had an ET member with like +70% winners but overall he lost money. In fact, he blew up (margin call) because he allowed his losing trades to be huge losers until the final one was a loser he couldn't return back from.

He didn't believe in using stops.

Therefore, if your trading plan involves minimizing the losses in the losing trades while allowing the winners to run their course to profit targets...you essentially have a winning trading plan with a questionable trade strategy.

Regardless, win/loss ratio is still an important statistic to maintain with other important statistics.

wrbtrader
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Well said, thanks
 
If you are trading big then winning% is important. You need liquidity to move in the right direction or else you'll pay to get out.
 
The paradox of trading "big" is that the trader is usually more selective >> which helps considerably with W/L %.

The flip side to the paradox is that you earn the right to successfully trade "big".

USDJPY said:
If you are trading big then winning% is important. You need liquidity to move in the right direction or else you'll pay to get out.
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