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Which is more important, win rate or profit and loss ratio?
I find that no one seems to discuss the importance of win ratio and profit-to-loss ratio, but in my trading process, especially in day trading, I find that the importance of win ratio is much higher than that of profit-to-loss ratio. When I trade FGBL, the market usually reverses within a few ticks and moves quickly after breaking a price. I use order flow to observe market orders, which are obvious trading actions. But when looking at the K-line chart, conflicts will arise. The profit-loss ratio of many transactions is not so high, and the profit-loss ratio of many transactions is 1 or less than 1 (analyze the price of support and resistance through the K-line chart as stop loss and take profit target point), and you can only know your stop loss position when trading, the take profit position is expected, and the expected price cannot be guaranteed, that is, the expected profit and loss ratio is very high, but if the actual price If it is not reached, it will stop, and the profit and loss ratio is also at a very low ratio. There is also a trap. When the position is very small from the stop loss point, for example, it is only 2-4 ticks, and the price moves in the direction of profit, there will be a value of more than 100 times the profit and loss ratio. How can you insist on trading according to the profit and loss ratio? For example, in yesterday's FGBL, after I broke through 168, I entered a long order at 168.04, and the price moved to more than 171, and the profit and loss ratio was directly unbelievably high. I was trading BTC before, and I was very focused on the profit-to-loss ratio at the time, but this also restricted me from not trading on many opportunities, especially when the trend was trending and there were few pullbacks, which would result in no obvious support and then could not enter the market situation, as the profit-loss ratio may be as low as 0.1. After I traded FGBL, I found from my actual trading performance that the first focus of trading is to focus on winning instead of focusing on the P/L ratio. My trading is more flexible and I can keep up with the pace of the market and make profits.
Can you help answer these questions from other members on NexusFi?
"Which is more important, win rate or profit and loss ratio?".
Neither, they are both interconnected.
An average win rate greater than 50% is likely easier psychologically when it comes to not hesitating to take the next trade after a loss, and also being quicker to realise that your style of trading isn't working in the current market conditions so perhaps better to pause than continue throwing money away or not being able to get a decent profitable move. But it doesn't mean one will be profitable if the losses are much larger than their gains.
It is useful to know what one's win rate and PnL ratio is so that one knows whether the results for that period are normal or expected relative to other periods. But otherwise rather than needing two numbers, in my opinion it, is simpler to consider the one number of Expectancy which includes them both.
One either has a positive expectancy or one doesn't, that's it.
You do not win as a trader, you just get to play again the next day. If that game doesn’t appeal to you then you should not trade. Gary Norden
Considering the expected value of the transaction is that it needs to be based on a large number of transactions. It takes hundreds or even thousands of transactions to achieve a large number effect, but the vast majority of people have lost all their money before they have a large number of transactions. I think only non-day trading is suitable without a lot of trading. Swing trading and trend trading can give the expected target position through traditional technical analysis, and it is also more effective, like I said, I used to trade BTC, and the volatility of BTC is very large, even intraday trading will be quite large price trend. But when I trade FGBL in a similar way, it doesn't work anymore.
I wouldn't say that this is a subject that isn't discussed.
Generally, a high win rate is associated with scalping and smaller profits. While a lower win rate requires at least a 2:1 ratio on win/losses. Preferrably more.
The problem with the high win rate methodology (assuming your profits are fairly small which they typically are) is that once in a while you'll take a loss and it's usually one that eats into a lot of your profits.
I was a 100 % scalper for a while and it was great until I encountered a losing streak. Maybe I could adress those losses somehow. Psychologically and practically as well, there's something nice about getting quickly in and out with a high win rate. In a sense it feels like you're printing money and it feels more like you have an edge. I would also usually be done trading in 30-60 minutes.
When going for larger profits you'll have to invest more time to monitor the market and your trade.
