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  1. #1
    Senior Member grindtime's Avatar

    Why your win rate doesn't really matter !!!

    Ok so we all get hung up on win rates. And it's said you need a win rate of 55% or something to be profitable.. I'm going to show you exactly why we shouldn't focus so much on win rates because it's really ALL ABOUT THE BENJAMINS BABY

    For example.. You can click on my profile and see my win rate is only 46% YET I have close to $2000 profit in my account..

    Ok.. Now to the moral of my story..

    Using proper risk & reward management can make a big difference in your account balance. Let's face it , I'm here to MAKE MONEY, not have the highest win rate.. You can have a win rate of 80% and lose money..

    Lets say we made $100 trades on the
    First Trade - $100 win - $80
    2nd trade - $100 win- $80
    3rd trade - $100 win - $80
    4th trade - $100 win - $80
    5th trade - $100 win - $80
    6th trade- $100 win- $80
    7th trade- $100 win - $80
    FEELING REAL CONFIDENT ABOUT MY SKILLS NOW
    8th trade - $500 trade win - $300
    FEELING INVINCIBLE NOW
    9th trade $1000- LOSS - $1000
    WANT TO MAKE MY MONEY BACK SO I'M DOUBLING UP NOW
    10TH trade $2000 - LOSS - $2000

    Total earnings with 80% win rate -$2140

    ( Math may be a bit wrong , but you get the picture )

    Applying proper "Risk & Reward" management makes all the difference..

    Some people recommend trading a flat amount of 2%-5% on every trade.. Which if you have a balance of $75,000 than this seems ideal... But most of us don't trust brokers with that type of money and most of us don't trade the same amount on every trade...

    When I see a set up which to my "criteria" is a very HIGH probable set up , I invest more than I do when I take a set up which is on the low end of my "criteria" ....

    Risk Management is vital.. But don't forget to also include Reward Management in there as well.. Risk & Reward Management....

    And don't get hung up on win rates.... I know some poker pro's with solid win rates that are broke ...

    The biggest concern for me is MY ACCOUNT BALANCE , I could care less if my win rate was 30% , if I made a profit of $7500 that month ....

  2. #2
    Veteran Member randy1953's Avatar
    Good point however if your win rate is 46% it's impossible to be in profit if all your trades were the same amount. the system is set up always that you need to put up more money than you will win. which means you have to put quite a bit more money at risk for those winning trades than the loosers..just saying but I agree with you 100% well said.
    thanks
    Randy

  3. #3
    Senior Member grindtime's Avatar
    QUOTE=randy1953;49795]Good point however if your win rate is 46% it's impossible to be in profit if all your trades were the same amount. the system is set up always that you need to put up more money than you will win. which means you have to put quite a bit more money at risk for those winning trades than the loosers..just saying but I agree with you 100% well said.
    thanks
    Randy[/QUOTE]

    All my trades were not the same amount.. That was the point I was making, about using Risk & Reward management.. Some traders trade the same amount with every trade, I don't... Maybe it's the forex trader in me , or the gambler in me.. But I apply Risk & Reward management..

    For another example... Lets say we were betting on sports - football season has 16 games.. If I bet $100 on just the bets I was not that sure about , and ended up losing those , but the 3 games of the 16 that I was really, really, confident in I bet 30x the amount I normally bet and won. I would have a nice sized bankroll even though my win-rate sucked..

    Was just shining light on the subject , that just because someone has a good win rate , does not mean they are profitable.. And we should not be overly concerned with our "win rates" as when it boils down to it, it's about 'How much money did you make?

  4. #4
    Legendry Member Michael Hodges's Avatar
    this is an interesting topic. OF course you don't have to make the same size trade on each trade but doing it the way you describe is really risky, who knows which trades will win and which will lose, you could easily increase your losses just as well as increase your wins. However... adding rules to a strategy in which weak signals get traded at a standard 3% and then when you get a strong signal, strong as described by technical rules and chart confirmations, strong signals can be traded at 5%. Or whatever percents you like to use.... my strat has weak, swing and strong signals so I could do this .... but what I usually do is enter more trades when the signals are strong because they come closer together.

  5. #5
    Senior Member grindtime's Avatar
    Exactly Mike ... Everyone has their own set of rules, or should have a set of rules. And I was being a bit extreme in my example just to show people what I meant ..

    Was really just shining some light on the point we all get misled about often, is that a high win rate = profitable ... Which is not the case.... As you said your strat has "weak" and "strong" signals , which most do... And, if we can use proper "Risk & Reward" management, it increases our profitability regardless of what our win rate says...

    In general having a good win rate is a good sign, "assuming" you are trading the same amount on each trade, But if the person is trading different amounts on each trade the persons win rate could mean nothing if they are not exercising appropriate risk/reward management... Say someone made 100 trades and won 95 of them trading 5% of their balance, but the 5 they loss they traded 25% of their balance , your 95% win rate doesn't make you feel much like a winner. lol.....

  6. #6
    Senior Member grindtime's Avatar
    Also I never advised anyone to apply a certain % or amount per trade. That is up to you to figure out.. My post just had those numbers to demonstrate how a strong win rate , could still be losing money.. When it comes to adjusting your trade amounts , that will all depend on your "risk" levels and trading rules, which you would need to decide a safe way to follow...

    I'm interested in hearing some idea's on "sets of rules" and past experiences with your trade amounts for "strong" signals vs. your trade amounts vs. "weak" signals , or if you stick to a certain amount "no matter what" ...

  7. #7
    Veteran Member randy1953's Avatar
    I agree win rate is not everything but as long as you don't go crazy meaning over confident like your post shows you cannot loose if you have a 70% win rate end of story. however if you only have a 46% win rate no matter how good your risk management is you will always be on the edge.

  8. #8
    Senior Member grindtime's Avatar
    Quote Originally Posted by randy1953 View Post
    I agree win rate is not everything but as long as you don't go crazy meaning over confident like your post shows you cannot loose if you have a 70% win rate end of story. however if you only have a 46% win rate no matter how good your risk management is you will always be on the edge.

    The 46% win rate was an example because that is what my win rate is on this trading forum.. I haven't traded at all in the past year until this past month.. Realistically speaking I'd say my win rate is close to 60% and that's taken from a sample size of less than 500 trades , so it's hard to say..

    Here is an article on the topic of the thread, which I thought you may find interesting.. ( However it is related to forex trading, but still shines some light on the subject )

    http://www.learntotradethemarket.com...ant-in-trading

    My post was intended to point out that "win rates" are not what makes a trader good. Profitability is what makes a trader good. I'd much rather follow a trader who was making $250,000 a year with a 40% win rate, than follow a trader with a 65% win rate making $10,000 a year...

    Generally speaking people with higher win rates, have also manage to become disciplined enough to apply proper risk management , but as I said I increase my "trade size" with stronger signals and it makes a big difference.


    Also when establishing an accurate win rate what would say an appropriate sample size would be. I can guarantee you that with 5000 trades under your belt , your win rate may be slightly different than it is with 100 trades. If your batting 70% after 2000 trades you are a BEAST and probably have the whole risk & reward dynamics down pat....
    Last edited by grindtime; 07-15-2015 at 07:01 AM.

  9. #9
    Veteran Member Ronnel's Avatar
    I tried something similar once only on minimum and I got greedy and the market bit me hard. Same experience with my old car exporting business. First I was doing well and only bought cars that was ordered by my customer and made good money but I aimed for more and bought several cars in advance with the hope that I'll make more money but I learned that my customer wanted another brand of cars for his next shipment. I lost money and was forced to send 4 nice Honda Odyssey, 2 Toyota Estima and 3 Mitsubishi Delica 4WD to the scrapper. I increased the stake and it bit me hard. With my sad experience, I treat BO the same that if my win rate decreases, I will stop and practice on demo and paper trading again until I see some good changes on my performance. I don't have much money and I'm not willing to gamble. For me I only trade minimum and will only increase the stake when I have won enough money but until then, I'll stick with minimum because I want to stay in the game just a little bit longer. These last few days I lost 10% of my account so I'm back to the drawing board again hoping to increase my wins. For me win rate is everything.

    I also learned from my senior who is a retired company pro trader who passed away two weeks ago that their stakes are high but their company's capital is huge so losing several millions won't get their company bankrupt. He said that their company only employs pro traders with high win rates and losers gets booted out. I think he has a point.

  10. #10
    Legendry Member milos's Avatar
    It is needed a minimum 55% success rate to be in profit.

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