The issue is not just the strategy itself...its the entire trading plan. Thus, you can have a strategy that loses 50% (wins 50%) but if its within a trading plan that's able to exploit the wins for example keeping the losing trades small and the winning trades big... Thus, we had an ET member with like +70% winners but overall he lost money. In fact, he blew up (margin call) because he allowed his losing trades to be huge losers until the final one was a loser he couldn't return back from. He didn't believe in using stops. Therefore, if your trading plan involves minimizing the losses in the losing trades while allowing the winners to run their course to profit targets...you essentially have a winning trading plan with a questionable trade strategy. Regardless, win/loss ratio is still an important statistic to maintain with other important statistics. wrbtrader
My win rate has been < 40% on average going all the way back to 2013 when I started trading options full time.
This is a brilliant thread, thx to all for posting,, and OP for bringing it up. It's so important. Really wish I knew all this 20 years ago. You guys are all making great points. Truth is there's no single correct answer, it depends on individual trading styles. Perfect analogy is winning poker players, world champions like Ivey, Esfandiari and Negreanu all play uniquely. There's a few things we can likely all agree on like avoiding big stops. Super insights, valuable tips, thx
I agree completely on the average loss /average win issue, that's what I tried to explain in the article provided in the link at the primary post, regarding MAE & MFE I never really saw these as major contribution to my understanding of a trading strategy but maybe I'm missing something here, I would love to hear how these risk metrics contribute to your understanding and how you use them to improve a trading strategy, thanks
If you are trading big then winning% is important. You need liquidity to move in the right direction or else you'll pay to get out.
The paradox of trading "big" is that the trader is usually more selective >> which helps considerably with W/L %. The flip side to the paradox is that you earn the right to successfully trade "big".