Win Rate

Win rate is the easiest trading metric to compute and the easiest to mislead with. A 70 percent win rate sounds excellent and tells you nothing about profitability — if average winners are smaller than average losers (a common pattern under poor hold-time discipline), a 70 percent win rate produces a losing account. Conversely, world-class trend-following strategies routinely run win rates below 40 percent and produce strong returns because of asymmetric win size.

Win rate is most useful as a sanity check against other metrics. A claimed profit factor of 3 with a win rate of 35 percent is internally consistent (asymmetric winners). A claimed profit factor of 1.2 with a win rate of 80 percent is also consistent (small edge, accurate). A claimed profit factor of 3 with a win rate of 80 percent is implausible — the math has to come from somewhere, and the most likely answer is that the sample is too small or selection bias is at work.

The most common misuse of win rate is psychological. Traders who optimize for hit rate often close winners early to lock them in, which raises the win rate but reduces expectancy. The cure is to value the math (expectancy, R-multiple) over the feeling (every closed trade was a win).