[Readable in 3 minutes: Practical Investment Course] Lecture 2: Do Not Choose a Method by Win Rate
Today's Conclusion
If you choose a method based only on win rate, you may end up picking a losing method.
What to look at is the combination of win rate and the size of each win/loss.
80% win rate but money decreases
When you hear “80% win rate,” it sounds good. After all, you win 8 out of 10 times.
Now, let’s lay out two methods side by side.
| Method A | Method B | |
| Win Rate | 80% | 40% |
| Per Win | 10,000 yen | 30,000 yen |
| Per Loss | 50,000 yen | 10,000 yen |
| Results over 10 trades | 80,000 yen–100,000 yen = minus 20,000 yen | 120,000 yen–60,000 yen = plus 60,000 yen |
※ This is a simple calculation that does not consider costs such as spreads.
A with twice the win rate loses, while B wins.
Even if A wins steadily 8 times, two losses wipe out all gains. B loses four times but makes up a lot with six wins. In terms of the PF discussed earlier, A is 0.8, B is 2.0.
The required win rate is determined by the size of wins and losses
The win rate needed to break even can be calculated with the following formula.
Loss amount ÷ (Win amount + Loss amount)
A: 5 ÷ (1 + 5) ≈ 83%. With an 80% win rate, you’re just short of breaking even.
B: 1 ÷ (3 + 1) = 25%. If you win once in four trades, you break even.
Even with the same “win rate” number, the meaning differs completely depending on the method.
Still drawn to high win rates
Being drawn to high win rates is natural. After all, nobody likes to lose.
However, that feeling can backfire in trading. When a little profit appears, you want to lock it in immediately, and you want to hold onto losses until they recover. Before you know it, winnings become small and losses become large. This is exactly the shape of Method A.
The reason why promotional materials often feature only high win rates is probably the same. The viewer responds to it.
Today's Check
Over the last 10 trades, compute the average gain when you won and the average loss when you lost.
If the average loss is larger, even a high win rate cannot guarantee safety. If there are no records, start tracking from the next trade.
Next Preview
Next time: “Reading trading results with four numbers: win rate, PF, expectancy, and drawdown. We’ll organize which parts of the performance sheet to look at.
By the way, TSUBAKURO’s win rate is 56.4%.
These are the backtest figures of the TradingView strategy I sell, “TSUBAKURO,” on XAUUSD 1-hour chart (January 2025–October 2026, 39 trades). The win rate alone is ordinary, but since we set the profit target to twice the loss, the PF became 2.56. This result comes from building the strategy around win/loss sizes rather than chasing win rate. It’s based on historical data, so there is no guarantee it will be the same in the future.
※ This article is intended to provide information to support investment decisions and does not constitute a recommendation to buy or sell any specific financial products. The figures in the article are for illustrative purposes only and do not guarantee future performance. In FX, CFD, and other leveraged trading, there is a risk of loss exceeding your original investment. Please make investment decisions at your own risk.