【FX Course】Win with a 70% win rate, lose with a 10% win rate yet still win
Even with RR1:1, you can win.
Hello, I’m Leo.
When you are trading,
“Is a higher-win-rate method better?”
I’m asked this quite often.
Indeed, win rate is important.
However, I
just by win rate
because there are methods that lose even with high win rates, and conversely, methods that remain profitable even if the win rate isn’t that high.
What becomes important then is
RR (risk-reward)
.
What RR is
RR is
per one loss
this way of thinking.
Stop loss 10 pips / Take profit 20 pips →RR 1:2
Stop loss 10 pips / Take profit 30 pips →RR 1:3
In other words, even with the same single trade, the required win rate changes depending on how much profit you aim for.
RR1:1 requires about 50% win rate
First, the simplest is RR1:1.
For example,
One win:10,000 yen
If you trade 10 times and go 5-5,
5 losses × 10,000 yen ＝-50,000 yen
It’s basically break-even.
Thus, in theory, around 50% win rate is the break-even point for RR1:1
.
RR1:2 requires about 33% win rate
Next is
If you lose once, you lose 10,000 yen; if you win once, you gain 20,000 yen.
In this case, after 3 trades with 1 win and 2 losses,
2 losses × 10,000 yen ＝-20,000 yen
It’s almost even.
Required win rate is about 33%
RR1:3 requires about 25% win rate
With RR1:3,
One win：30,000 yen
If you trade 4 times and have 1 win and 3 losses,
3 losses × 10,000 yen ＝-30,000 yen
It’s almost even.
Required win rate is about 25%
Putting the required win rates side by side makes it clear
Looking at these numbers, you can see that judging a method by win rate alone is dangerous.
Even with a win rate of 70%, you can lose
For example,
10 trades, 7 wins 3 losses → win rate 70%
Seems very good.
But,
One loss：20,000 yen
Suppose.
3 losses × 20,000 yen ＝-60,000 yen
Even with a 70% win rate, you can lose.
Conversely, you can stay profitable with a 40% win rate
Now, if you trade 10 times,
4 wins 6 losses = win rate 40%
The numbers may seem low.
But,
One loss：10,000 yen
6 losses × 10,000 yen ＝-60,000 yen
Even with a 40% win rate, you can be clearly positive.
That’s why I look at RR.
What happens if you chase a high win rate too much
If you only think about increasing win rate, trades can break down.
・Wait for break-even or beyond for stop loss
・Small wins and big losses
In such cases, the win rate can become high.
But
If that becomes the pattern, it’s very dangerous in the long run.
Don’t bring take-profit too close just to raise RR
For example, in a market where you could normally gain 30 pips,
you might think, “I don’t want to lose,”
so you take profit at 5 pips.
If you repeat this, your win rate may rise.
But,
bring take-profit closer just to raise win rate
Conversely, it isn’t enough to just have a high RR
This is also very important.
“Then should I aim for RR1:5 every time?”
That’s not the idea.
Even if you aim for five times the profit each time, if price doesn’t move that far, your win rate drops too much.
In other words,
.
I decide the RR from the chart
In my case, from the start I do not say
“Today I will take RR1:3.”
First, I look at the chart.
② Where a break would collapse the scenario
③ Where are the next highs and lows
④ How much price movement to there
As a result,
Take profit candidate 20 pips
→ RR1:2
That is,
letting RR be determined by watching the chart
If RR is poor, do not enter
For example, a point that looks like a very good buying point.
But,
To stop loss: 30 pips
then, RR is about 1:0.33.
Even if the direction is correct, I find such setups hard to enter.
Because,
even with 3 wins, one loss can wipe it out
.
In other words,
.
RR helps you decide to pass on trades
Being mindful of RR reduces entry frequency.
But that’s okay.
“Stop loss far away → skip”
“Stop loss small, can extend profits → aim for it”
You’ll be able to make these judgments.
Look at expectation value rather than win rate
In the end, what I look at is not win rate alone,
expectation value
.
Simply put,
in the end
That’s the idea.
Not just one win and one loss.
But what happens if you do it 100 times
.
For example, what happens after 100 tries
Suppose,
RR:1:2
One loss:10,000 yen
If you did 100 trades,
60 losses × 10,000 yen ＝-600,000 yen
Even with a 40% win rate, the expectation value is positive.
It’s not about how many times you won, but how much is left at the end
I don’t negate win rate itself.
Win rate is obviously important.
But that alone isn’t enough.
It’s important to view these together.
Trading isn’t a game of predicting how many times you hit in 10 tries.
It’s whether your capital increases in the end.
Even with RR1:1, you can win if your win rate is solid.
With RR1:2, you can stay profitable even if win rate is a little lower.
With RR1:3, the required win rate drops further.
However, having a high RR alone doesn’t mean everything is good.
is the balance between your win rate and RR
I myself don’t judge trades by “What percent win rate?”
More than that,
how much you can gain when you win once
I look at these.
Rather than win rate, look at expectation value.
If you trade for a long time, I think this is a very important concept.
“Leo FX college”
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