"What's your win rate?" is the most common question about a strategy, and on its own it's meaningless. A 30% win rate can be very profitable; a 70% win rate can lose money. What matters is win rate and the size of wins relative to losses together.
Thinking in R
R is your risk on a trade. If you risk $100, a $250 win is +2.5R and a full loss is −1R. Measuring in R lets you compare trades of any size and any instrument.
Breakeven win rate
The win rate you need just to break even depends on your average reward-to-risk: breakeven win rate = 1 ÷ (1 + R).
Expectancy
Expectancy is the average result per trade: (win rate × average win) − (loss rate × average loss). In R terms, a positive number means the strategy makes money over many trades.
Worked example
Strategy A: wins 40% of trades, average win 2.5R, average loss 1R.
Expectancy = (0.40 × 2.5) − (0.60 × 1) = +0.40R per trade. Risking $100 per trade, 100 trades make about $4,000.
Strategy B: wins 70%, average win 0.4R, average loss 1R. Expectancy = (0.70 × 0.4) − (0.30 × 1) = −0.02R: it loses money despite winning most trades.
| Win rate | Average win | Expectancy per trade |
|---|---|---|
| 30% | 3R | +0.20R |
| 40% | 2R | +0.20R |
| 50% | 1.5R | +0.25R |
| 60% | 1R | +0.20R |
| 70% | 0.5R | +0.05R |
Key takeaways
- Win rate alone means nothing; it has to be judged with the size of wins and losses.
- Measure results in R, multiples of the amount risked.
- Breakeven win rate = 1 ÷ (1 + reward-to-risk); at 2R you only need to win a third of the time.
- Expectancy = (win rate × average win) − (loss rate × average loss), after costs.