Does a higher win rate lead to more profit?
In the trading world, many people rely on luck, and stocks that are listed by exchange decisions (for example, new index futures) always start on an auspicious day.
Speaking of luck, cranes and turtles are considered good luck, and there’s the saying, “A crane lasts a thousand years, a turtle ten thousand years.”
A pet turtle died, and the child who took care of it cried.
“Grandpa, you said you would live for ten thousand years!”
Grandpa replied, “Today just happened to be the day I reached ten thousand years…” This is a story from a rakugo joke.
My own experience was with making okonomiyaki with my family. My young son asked, “Daddy, can you flip it properly?” Although I boasted, “I’ve never failed!” I clumsily cracked it, and when I said, “It’s my first failure since I was born,” I was looked at with white eyes and utterly humiliated…
Expectations, by nature, are always betrayed.
Many people fall into an illusion and overestimate,“win rate”as a number.
Is the idea correct that the higher the win rate, the more profit you make?
If both winning and losing trades use the same quantity and the same price range, you won’t be profitable unless the win rate is high. Moreover, the logic holds that the higher the win rate, the more profitable it is.
But in reality,“quantity” and “price range” are not fixed.
They vary greatly depending on each trader’s discretionary decisions.
The accuracy of predictions cannot be avoided.
“It is impossible to predict with 100% accuracy.”
Another important point is,
“Even with effort, it is difficult to substantially raise the win rate.”
That is the reality.
If you forcibly try to raise the win rate, you end up in disappointing situations like the following.
・Raising the win rate means prioritizing small profits, which limits profit per trade
・Even adding small gains cannot offset losses when you lose
Therefore, in practical terms we think as follows.
・A win rate around 50% is ideal (don’t set unrealistic targets)
・Limit losses when things go wrong (small quantity, small price range, don’t waste time)
・When you are “on a roll,” let profits run (you have quantity, you persevere, it’s worth spending time)
—To be continued—
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