Average win loss ratio
Family III · Risk
Not to be confused with floating profit and loss, leverage ratio, margin ratio.
Average win loss ratio is a backward-looking performance statistic, not a risk control. It compares the mean size of profitable trades with the mean size of unprofitable trades over a stated period, so it describes outcomes already realised rather than limits set in advance. It is distinct from the win rate, which counts how often trades win rather than how large they are.
Calculation
The ratio is calculated by dividing the average winning trade by the average losing trade, using absolute values for the loss side so the result is positive.
- Average win = total profit from winning trades ÷ number of winning trades.
- Average loss = total loss from losing trades ÷ number of losing trades.
- Ratio = average win ÷ average loss.
A ratio above 1 means the typical winner is larger than the typical loser; below 1 means the opposite. The figure depends on the sample period, the instrument and the strategy, so it varies between traders and over time.
Worked example
Interpretation and limits
A ratio of 1.50 means the average winner was one and a half times the average loser. On its own it says nothing about profitability: a strategy with a high ratio can still lose money if the win rate is low, and a strategy with a ratio below 1 can be profitable if it wins often enough.
The statistic is sensitive to outliers, since a single unusually large win or loss shifts the mean. It also depends on how trades are grouped and over what period they are measured, so comparisons between traders or systems are only meaningful when the same conventions are used.
Often confused with
- floating profit and loss
- Floating profit and loss is the unrealised gain or loss on open positions, whereas the average win loss ratio is computed only from closed trades; the visible sign is that floating P&L changes tick by tick while the ratio stays fixed until trades are closed.
- leverage ratio
- The leverage ratio measures position size against account equity, while the average win loss ratio measures the relative size of realised wins and losses; the visible sign is that leverage is expressed as a multiple such as 10:1 and is set before trading, whereas the win loss ratio is a decimal calculated afterwards.
- margin ratio
- The margin ratio compares account equity with margin used and indicates how close positions are to a margin call, whereas the average win loss ratio is a performance measure with no bearing on margin requirements; the visible sign is that the margin ratio is a percentage of equity to margin, while the win loss ratio is a plain number such as 1.50.