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บทเรียน 4: Win Rate

Win Rate

If Risk and Reward are methods that help traders plan their trades to protect themselves from risk. One thing that traders should be aware of is the Win Rate, a tool to measure traders' effectiveness in finding the winning rate in trading.

 

What is Win Rate?

Win Rate is the winning percentage from trading once and is used to measure a trader's performance or accuracy.

 

However, having a high win rate does not necessarily mean you will be a successful trader or will always make a profit. This is because the Win Rate only measures the accuracy of exiting positions if closed with a profit and shows the total number of winning trades you have. For example, if you trade 10 times and win 6 times, your Win Rate is 60%.

 

Successful traders will try to balance the Win Rate and Risk Reward Ratio.

  • A low Win Rate but a high Risk-Reward Ratio indicates that these traders are more likely to accept higher risk to increase their chances of making a profit.
  • A high Win Rate but a low Risk-Reward Ratio indicates that these traders focus more on limiting risk and generating consistent returns.

 

 

 

Why is the Win Rate high but the Risk Reward Ratio low? 

High Win Rate but Low-Risk Reward Ratio.

Some traders achieve a high Win Rate of 60% out of 100 trades. However, their Risk Reward Ratio for each trade might be 1:0.5, meaning they risk 1 time for a potential reward of 0.5 times. This indicates that the trader focuses on short-term trades, closing positions immediately upon gaining a profit. As a result, their Win Rate is higher than their overall profit.

 

 

Why is the Win Rate low but the Risk Reward Ratio high?

Low Win Rate but High-Risk Reward Ratio.

Some traders achieve a low Win Rate of 40% out of 100 trades. However, their Risk Reward Ratio for each trade might be 1:5, meaning they risk 1 time for a potential reward of 5 times. 

 

For instance, they might experience 60 losses of $100 each (totaling $6,000) and gain 40 profits of $500 each (totaling $20,000). This suggests that the trader prioritizes long-term trades to secure substantial profits, resulting in a lower Win Rate than their overall profit.

 

 

 

Take an example from the original table to calculate Win Rate for each asset.

Group Asset RRR Win Rate
Group 1  BTC/USD 1:0.5 67%
Group 2  CAD/JPY 1:1 50%
Group 3  AAPL 1:5 17%

 



For example, from trading AAPL, the Win Rate can be calculated as follows.

Formula:

Minimum Winrate = 1 / (1 + Reward:Risk) x 100

Minimum Winrate = 1 / (1 + 5) x100

Minimum Winrate = 1 / (6) x100

Minimum Winrate = 0.166 x100

Minimum Winrate = 16.6% or approximately 17%.

 

 

If traders want to measure the performance of all traders' portfolios, such as a trader's portfolio has 100 trades, 50 wins, and 50 losses. Traders can use the following formula to calculate:

Formula:

% Win Rate = Number of winning trades / Total number of trades x 100

% Win Rate = 50 / 50 x100

% Win Rate = 0.5 x 100

% Win Rate = 50%

 

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