Win rate in trading is the percentage of your trades that close in profit. If 60 out of 100 trades end green, your win rate is 60%.
Now the part most people don't want to hear: on its own, win rate tells you nothing about whether you make money. A method that wins 90% of the time can empty an account, and a method that wins 35% of the time can stay profitable for years. Below, we'll show you why, with numbers.
Why win rate alone means nothing
Because it leaves out how big your wins and losses are. Win rate counts trades; it doesn't weigh them.
Put two methods side by side. Method one: out of every 10 trades, 9 are winners that make $10 each and 1 is a loser that costs $200. The win rate is 90%, but the total is a loss of $110. Method two: out of every 10 trades, 3 are winners that make $100 each and 7 are losers that cost $30 each. The win rate is 30%, but the total is a profit of $90.
Method one eats your account and method two builds it. If you had looked only at win rate, you would have picked exactly the wrong one.
The number that actually matters: expectancy
Expectancy tells you how much you can expect to make or lose per trade, on average. Here is the formula:
Expectancy = (win rate × average win) − (loss rate × average loss)
Run the two methods through it. Method one: (0.9 × $10) − (0.1 × $200) = −$11 per trade. Method two: (0.3 × $100) − (0.7 × $30) = +$9 per trade.
If the number is positive, repeating the method works in your favor over the long run. If it is negative, the more you trade, the more you lose, even if you have good days along the way. It is the only objective line between a method and a habit, and it is the same line we draw in our piece on whether trading is gambling.
A simpler way: measure everything in R
Instead of dollars, measure each trade in R: 1R is the amount you risked on that trade. If you risked $50 and made $150, the result is 3R. If your stop loss was hit, it is −1R.
The advantage is that trades of different sizes become comparable, and your average R is simply your expectancy, expressed in units of risk. If your average R is +0.3, each trade has, on average, netted you 30% of the amount you risked on it. To work out 1R correctly in the first place, read how to calculate lot size and position size.
Why a high win rate is so tempting
The reason is psychological, not statistical. Every winning trade is a small confirmation, and the brain likes confirmation. So people drift, without noticing, toward methods that win often, even when those wins are small and the rare losses are large.
Worse, a high win rate reinforces a dangerous habit: because price "usually comes back," you move your stop loss further away. That is the behavior that turns one loss into a disaster; our stop loss guide walks through how it happens. We cover the behavioral root of it in the psychology section.
How to measure your own expectancy
- Log every trade with its result in R, not just the dollar profit or loss.
- Collect at least several dozen trades. With 10 or 20 trades, whatever number comes out is chance.
- Calculate your average R. Whether it is positive matters more than how big it is.
- Keep tracking your win rate too, but only as an explanation: it tells you where your expectancy comes from, not whether it is good or bad.
The trading journal has exactly these columns and calculates your average R for you. If you are just starting out, why a trading journal matters more than any indicator explains why, without this kind of record, you won't have any of these numbers.
A warning about backtests
An expectancy you pull from historical data only means something if the test itself was done right. Three common mistakes can make any good-looking number fake; our backtesting guide covers all three.
The market doesn't pay you for being right. It pays you for winning more when you're right than you lose when you're wrong.
Summary
Win rate counts; expectancy weighs. Aiming for a high win rate almost always leads to methods with small wins and large losses, and that is exactly the structure that wipes out accounts.
Instead of asking "what is this strategy's win rate?", ask "what has my average R been over my last 100 trades?" Only your own data can answer the second question, and that answer is what your next decisions should rest on.
