Definition
Average Win represents the mean profit amount from your winning trades. It helps you understand the typical gain when a trade is successful.
Formula
Add up all the profits from your winning trades and divide by the number of winning trades.
Average Win = Total Profit from Winning Trades / Number of Winning Trades
Example 1:
- Total profit from winning trades: $15,000
- Number of winning trades: 25
- Calculation: Average Win = $15,000 / 25 = $600
- Interpretation: On average, you earn $600 per winning trade.
Example 2:
- Total profit from winning trades: $40,000
- Number of winning trades: 50
- Calculation: Average Win = $40,000 / 50 = $800
- Interpretation: A higher average win indicates more significant profits per trade.
| How It Can Be Used | Limitations |
|---|---|
| Setting realistic profit targets | Can be skewed by exceptionally large wins |
| Evaluating profit-taking effectiveness | Doesn’t consider the frequency of winning trades |
| Planning risk-reward ratios | May not reflect typical outcomes if data varies widely |
In Practice
Average Win helps in setting expectations and evaluating whether your profit targets align with historical performance. Ensure that your average isn’t disproportionately influenced by a few large wins.
