Wednesday, 14 November 2018

How many trades do you need to win to make a profit?

Let me get it out of the way: the winrate in trading it completely irrelevant on its own. Many traders put way too much emphasis on the winrate and do not understand that a winrate does not tell you anything about the quality of a system or a trader.
You can lose money with a 80% or even with a 90% winrate if your few losers are so big that they wipe out your winners. On the other hand, you can have a profitable system even with a winrate of 50%, 40% or onl 30% if you are good at letting winners run and cutting losses short.
It all comes down to your reward risk ratio.
The reward to risk ratio (RRR, or reward risk ratio) is maybe the most important metric in trading and a trader who understands the RRR can improve his chances of becoming profitable.

Independent trader, James Booth, explains more...


Source: https://www.tradeciety.com/how-to-use-reward-risk-ratio-guide/

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