Two traders argue in a forum thread. One says a high win rate is everything. The other says only risk-reward counts. They go back and forth for forty replies.
They are both half right. The two numbers are two halves of one answer.
What do the two words mean?
Win rate is how often you win. Win six trades out of ten and your win rate is sixty percent.
Risk-reward is how big your win is compared to what you risked. Risk ten euros to make twenty, and your risk-reward is one to two. People write that as 1:2. You risk one part to try to make two parts.
Win rate is about how often. Risk-reward is about how much. A trade result needs both.
Why can't one number tell you if you make money?
Picture two traders.
The first wins nine trades out of ten. That sounds great. But each win is small, and the one loss is big. When she loses, she loses as much as nine wins brought in. Over ten trades she is back where she started.
The second wins only three trades out of ten. That sounds bad. But each win is three times the size of a loss. Three wins of three bring in nine. Seven losses of one take away seven. Over ten trades she is ahead by two.
The trader with the worse win rate made more money. Looking at win rate alone, you would have picked the wrong one.
What win rate do you need for a given risk-reward?
Here is the one piece of arithmetic worth knowing, in words.
Say you always aim to win twice what you risk. Take three trades. One wins, two lose. The win brings in two. The two losses take away one each. Two in, two out: you are even.
So at one to two, winning one trade in every three is breakeven. Breakeven means you end at zero, before costs. Win more often than one in three and you come out ahead. Win less often and you slowly lose.
The same idea works for any ratio. The bigger your wins compared to your losses, the less often you need to win. Aim for three times your risk and one win in four keeps you even. Aim for the same size as your risk and you need to win more than half the time.
Costs push all of this up a little. Spreads, commissions and fees come off every trade, winners and losers alike. A real breakeven is always a bit higher than the clean one on paper.
What does it look like in a real journal?
Tom is the trader in EdgeFlow's demo. His example journal wins 35 percent of its trades, and still ends at +0.02R per trade. A win rate that low only reaches break-even because his wins are bigger than his losses.
Then the demo picks one combination of his confluences. Those 63 trades average +0.53R per trade. The win rate alone would not have shown you which trades to look at. The result in R does. This is example data, and it describes Tom only.
Why can't you just aim for huge winners?
Because the further away your target, the less often price gets there.
A target at twice your risk gets hit more often than a target at five times your risk. Push the target out and your win rate drops. Pull it in and your win rate rises. The two numbers pull against each other.
That is why a trader who copies someone else's "always use 1:3" rule can end up worse off. On their market and their setup, price may rarely reach three times the risk. Their win rate falls further than the bigger wins can make up for.
There is no ratio that is good for everyone. There is only the pair that works for how you trade.
What about trades you close early?
This is where most people's real numbers drift from their plan.
You plan for one to two. Then the trade goes your way, you get nervous, and you close at one to one. Your win rate stays high. Your average win quietly shrinks. On paper you trade one to two. In your journal you trade something smaller.
To know your real risk-reward, look at what you actually got on your winners. The target you set is the plan. The exit is what happened.
So what is a good win rate?
One that is high enough for the size of your wins. That is the only honest answer, and it is why the question has no single number.
A trend trader who wins a third of the time can be doing well. A trader who wins eight trades in ten can be losing money, if the two losses are bigger than the eight wins together. That second case is common: closing winners quickly and letting losers run pushes the win rate up while the account goes down.
Comparing your win rate with someone else's tells you very little. Their wins and losses are a different size from yours.
How do you check this on your own trades?
You need your last thirty to fifty trades, each with its result written as a multiple of what you risked. That way of measuring is called R: your result in units of risk. Winning twice what you risked is two R. Losing what you risked is minus one R.
Then ask two questions. How many of these trades won? And how big was the average win, in R, compared to the average loss?
Put the two answers next to each other. The average result of all your trades together, in R, is what traders call expectancy. What expectancy is explains that number fully. If it is above zero, your pair of numbers works so far. If it is below, one of the two has to change.
Thirty trades is still a small pile, so read the answer as a hint. How many trades you need before you can trust a setup covers why.
Questions people also ask
What is a good risk-reward ratio?
There is no single good one. One to two is a common starting point because it lets you be wrong more often than right and still break even. Whether it suits you depends on how often your trades reach that target.
Is a high win rate a bad sign?
No. A high win rate with small, steady losses is a fine way to trade. It is only a problem when a few large losses wipe out many small wins.
Does a low win rate mean my strategy is bad?
Not on its own. Many trend-following traders win less than half their trades. They make it up with wins that are much bigger than their losses.
Should I change my target to raise my win rate?
Only if your own trades say it helps. Moving the target closer raises your win rate and shrinks your wins. Check whether the total goes up, and look at more than the win rate.
Read next:
EdgeFlow shows your win rate and your average result per trade in R side by side, for all your trades and for each confluence you ticked. If your win rate looks fine and the month still ends near zero, read stuck at break-even.