Definition
The Win Rate is the percentage of your trades that result in a profit over a specific period. It answers the basic question: “Out of all my trades, how many did I win?”
Formula
To calculate your win rate, divide the number of profitable trades by the total number of trades you’ve made, then multiply by 100 to convert it into a percentage.
Win Rate = ( Number of Winning Trades / Total Number of Trades ) × 100
Example 1:
- Total trades: 50
- Winning trades: 30
- Calculation: Win Rate = ( 30 / 50 ) × 100 = 60%
- Interpretation: You won 60% of your trades.
Example 2:
- Total trades: 200
- Winning trades: 140
- Calculation: Win Rate = ( 140 / 200 ) × 100 = 70%
- Interpretation: A higher win rate of 70%, indicating more frequent profitable trades.
| How It Can Be Used | Limitations |
|---|---|
| Gauging overall trading performance | Doesn’t account for the size of profits or losses |
| Comparing different strategies or time periods | A high win rate doesn’t guarantee overall profitability |
| Setting personal performance benchmarks | May encourage overtrading to maintain high win rate |
In Practice
While a high win rate might seem ideal, it’s crucial to consider it alongside other metrics like Average Win and Average Loss. For instance, a trader with a 90% win rate but small profits and large occasional losses might be less profitable than someone with a 60% win rate but larger average profits.
