Win rate - its a myth & consequences to not following rules!
A great example with these stats on AUDUSD....
So many times traders ask about 'win rate', in a strategy with the right expectancy it's simply not important. Win rate without understanding risk to reward is a useless KPI - here we see a strategy where only 30% of trades 'win' - yet the average win far outweighs the average loss to give the great net profit stats shown.
Please also note the DD stat is maximal dd, so this is the total maximum losing run found within this testing period.
Letting your winners run is key as we continue to say. We can actually play with the TP here on the exact same strategy to generate a much higher win rate, but the profit drops - thus proving further that win rate is vanity - it tricks you into thinking you are winning more than you are losing, which you are! BUT, you are making less money!! All we did was reduce the RR to 1:1.
The picture will not upload - but the stats change to:
22% net profit (a tenth of the profit on the same trades!) / 56.22% win rate off the 217 trades - and again the only thing we changed is our exit price. Same entry, same strategy and same SL - just holding the trades until a reverse signal and thus riding the big market moves.
Percentage gains are the only important factor in trading - but you have to get used to losing more than you win and being emotionless from the market. The challenge here is when you do get that winning trade not to close it early because of FOMO.
Mindset and trading psychology are fascinating - learn to follow rules within your strategy!
It would be far easier to teach complete newbies how to execute our strategy by simply instructing them to do x,y,z in order; they would make more money than some traders that think they know best and whom are emotionally tied to their trades - this affects decision making and their ability to stick to their plan.
Here is a question for you? A heart surgeon, if he doesn't stick to the plan in an operation, whats the consequence? People die! Or the engineer cutting corners checking the plane, etc., etc, I could give numerous examples, yet most struggle to stick to their plan in trading - do you even have a plan is the first question!
Regards
Darren
So many times traders ask about 'win rate', in a strategy with the right expectancy it's simply not important. Win rate without understanding risk to reward is a useless KPI - here we see a strategy where only 30% of trades 'win' - yet the average win far outweighs the average loss to give the great net profit stats shown.
Please also note the DD stat is maximal dd, so this is the total maximum losing run found within this testing period.
Letting your winners run is key as we continue to say. We can actually play with the TP here on the exact same strategy to generate a much higher win rate, but the profit drops - thus proving further that win rate is vanity - it tricks you into thinking you are winning more than you are losing, which you are! BUT, you are making less money!! All we did was reduce the RR to 1:1.
The picture will not upload - but the stats change to:
22% net profit (a tenth of the profit on the same trades!) / 56.22% win rate off the 217 trades - and again the only thing we changed is our exit price. Same entry, same strategy and same SL - just holding the trades until a reverse signal and thus riding the big market moves.
Percentage gains are the only important factor in trading - but you have to get used to losing more than you win and being emotionless from the market. The challenge here is when you do get that winning trade not to close it early because of FOMO.
Mindset and trading psychology are fascinating - learn to follow rules within your strategy!
It would be far easier to teach complete newbies how to execute our strategy by simply instructing them to do x,y,z in order; they would make more money than some traders that think they know best and whom are emotionally tied to their trades - this affects decision making and their ability to stick to their plan.
Here is a question for you? A heart surgeon, if he doesn't stick to the plan in an operation, whats the consequence? People die! Or the engineer cutting corners checking the plane, etc., etc, I could give numerous examples, yet most struggle to stick to their plan in trading - do you even have a plan is the first question!
Regards
Darren
