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Win rate and R:R together

Risk & Position Sizing

Win rate alone tells you nothing

Win rate alone means nothing without knowing the size of wins and losses. A trader who wins 30% of the time can still be highly profitable if winners average 4R and losers average -1R.

The math behind it

The math: 30 wins times 4R equals +120R. 70 losses times -1R equals -70R. Net result, +50R across 100 trades, positive despite losing on most individual trades.

Don't chase win rate alone

Chasing a high win rate by itself, while ignoring the size of the average win versus the average loss, is a common way traders convince themselves a losing system is working.

Check yourself

A trader wins 30% of trades, with average winners at +4R and average losers at -1R. Over 100 trades, this system is…

  1. Solidly profitable overall correct
  2. Guaranteed to lose money
  3. Impossible to evaluate without more information

The size of the wins more than makes up for the lower win rate across a large enough sample.

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