What is Win Rate?
Quick answer
Win rate is the percentage of trades that end in a profit. It is useful but incomplete on its own, because a high win rate can still lose money if the losses are larger than the wins. Win rate should always be read alongside risk and reward: at a 1:2 risk and reward ratio you only need to win about a third of the time to break even.
Win rate is one of the first numbers people look at when judging a trader, and also one of the most misunderstood. A high win rate looks reassuring, but it does not tell you whether a strategy actually makes money.
What win rate does and does not tell you
Win rate is simply the share of trades that closed in profit. The catch is that it ignores the size of the wins and losses. A trader who wins 80% of the time but lets the occasional loss run huge can still lose money overall, while a trader who wins only 35% of the time with a strong risk and reward ratio can be profitable. That is why win rate has to be paired with the average size of wins versus losses.
Win rate and risk and reward
The breakeven win rate is the percentage you need to win just to break even at a given risk and reward ratio. At 1:1 you need to win 50% of the time; at 1:2, only about 33%; at 1:3, about 25%. When you look at a trader to copy, put their win rate next to their risk and reward and their drawdown, rather than treating a high win rate as proof of a good strategy.
Frequently asked questions
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