Glossary
Win rate
The share of trades that end in profit. On its own it says little: a 40% win rate can make money and a 70% one can lose it.
The win rate is the number of winning trades divided by the total number of trades. It describes how often a method wins, not how much. Whether a method makes money depends on the win rate together with the average win and the average loss, after costs.
Example
Out of 100 trades, 40 win. The win rate is 40 ÷ 100 = 40%. If each win is +2 R and each loss −1 R, the total is 40 × 2 − 60 × 1 = +20 R. A method with a 70% win rate, wins of +0.3 R and losses of −1 R makes 70 × 0.3 − 30 × 1 = −9 R.
Why it matters
A high win rate is easy to produce by taking small profits and leaving losses open. Small samples also mislead: with 12 wins in 20 trades, the 95% confidence interval for the true win rate runs from about 39% to 78%.