TIP: Allow the Win Rate to Swing

Another of the most important factors when developing or considering a trading system is the percentage of profitable trades, what we have called the Win Rate.

The lack of understanding of the Win Rate figure goes also further as many traders think that a higher percentage of profitable trades is better than a lower number - but it is not. It all depends on how it relates to the Average Profit per trade, the trade frequency and the duration of the trades.

The type of trading system you develop will usually imply a certain Win Rate. For example, very short term scalping methods may incur a high Win Rate but have a low Average Win Rate. Alternatively, breakout systems may reflect a lower percentage of winners but the Average Profit per trade is usually greater because of a better Win/Loss ratio. 

The same happens when considering the time frames used: very short-term time frames may frustrate attempts to raise the Win Rate since a position should be right immediately after opening, while a position on a large time frame will usually wade through many whipsaws. before reaching the target.

On the other hand, intraday systems (traded on 4H time frames or less) are better shaped to control losses than long term position trading systems, because the incurred losses in a smaller time frame should be smaller (on average) than a position held a larger period of time. Read More

Do you want to learn more?

VIDEO: How to Increase Your Win Rate With One Weird Trick - Walter Peters
REPORT: Luck vs. Skill in Trading - Traders' Magazine


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