Win rate in trading
Family III · Risk
Not to be confused with win rate in trading, average win loss ratio.
Win rate in trading is the percentage of closed trades that end with a net profit, calculated by dividing the number of winning trades by the total number of closed trades. It is a descriptive statistic of a trading record, not a measure of profitability, because a high win rate can coexist with a net loss if the average losing trade is larger than the average winning trade.
Calculation and scope
Win rate is computed only over closed trades; open positions are excluded because their outcome is not yet realised. The formula is:
- Win rate = (number of winning trades ÷ total closed trades) × 100.
A trade counts as a win when its net result after commissions, fees and financing is positive. Because cost structures vary by broker, instrument and account type, two traders with identical entry and exit prices can record different win rates on the same sequence of trades. The period over which the rate is measured — a day, a month, a strategy's full history — must be stated, since a small sample can produce a rate that does not persist.
Worked example
Interpretation
Win rate describes frequency of profitable outcomes, not the size of those outcomes. It is normally read alongside the risk-reward ratio and expectancy. A strategy with a 70% win rate and an average win of 1 unit against an average loss of 3 units loses money overall; a strategy with a 40% win rate and an average win of 3 units against an average loss of 1 unit profits. Win rate also interacts with maximum drawdown: long losing streaks are more likely at low win rates, and the capital required to survive them varies with position sizing.
Often confused with
- win rate in trading
- This entry defines the same concept; the slug 'win-rate' is the canonical page for the percentage of closed trades that are profitable, whereas 'win rate in trading' is an alternate label for that identical measure, so the visible sign is that both pages carry the same formula and no separate metric.
- average win loss ratio
- The average win loss ratio is a performance statistic that divides the mean profit of winning trades by the mean loss of losing trades over a chosen period, expressing how much the typical winner earns relative to the typical loser.