“What’s the win rate?” Probably one of the most common questions we all hear when someone checks out a new system or indicator. And fair enough, win rate sounds like a solid measure of performance, right? Before you make your next decision based on that number, maybe take a minute to see what’s really behind it. We laid it all out in this post (with simple logic and real trade examples): Check it out here → https://forum.hellowin.io/public/d/286-is-win-rate-really-that-important-in-trading?src=etads
Good Morning MarkBrown, LOL, nice and sweet. I agree. What is your recommended profit factor to aim for?
anything lower than 1.2 is tuff but still a edge anything over 3 is probably gonna fail. most my stuff falls between 1.5 and 2.25 thats on massive amounts of data else you can get higher numbers with little data but it won't hold up in the long run. i look for at least 10,000 trades on a test, as you know the more data and trades the lower the pf will be. so it's a real juggle to make sure you have lot's of data lot's of trades and lot's of setting to choose from - and the discipline not to pick the best settings and still get 1.5 to 2.25 numbers. i have often seen much higher pf's but that is usually trend following systems that have far fewer trades. Breaking It Down A daily trading system over 40 years (assuming 250 trading days per year) would have: 40×250=10,000 data points40 \times 250 = 10,000 \text{ data points} An intraday system with 200 bars per day over the same 40-year period would have: 40×250×200=2,000,000 data points40 \times 250 \times 200 = 2,000,000 \text{ data points} That’s a 200x difference in data volume! Why This Matters Profit Factor Distortion – A system tested on fewer data points (daily bars) can have a higher profit factor simply due to lower variance and optimized entry/exit points. Reality Check – If a daily system were subjected to high-frequency testing with the same data density as intraday systems, its profit factor would likely drop significantly due to increased trade frequency and the reality of slippage, spreads, and execution variance. Survivorship Bias – Many daily systems look amazing historically but fail when exposed to higher-frequency execution, market microstructure effects, and realistic position sizing constraints.
Win rates below 33% are psychologically much harder to trade. Even if very positive R:R and profit factor. eg. With a 25% win rate system the losing streaks will too large for most people to handle even if the system makes a nice profit in the end. I aim for 40%+ myself, even 33% or 35% is too low for me.
i agree completely i like to see 65% or better but i will take larger losses and smaller profits to get that. i make up for smaller profits by knowing when to increase number of contracts and when to reduce.
It is much easier if you don't need to cut losses and can just book wins all day, every day. That is Maestro level MASTERY, reserved only for those with multi-nicks!
Thanks for sharing your research. In your experience what profit factor is consider to be good for a 1 lot all in all out system?
systems do much better when you split them up long only and short only the profit factors and all results are always better. but if you have a system that is always in the market like we use to trade the profit factor will suffer some about 10-20% off what a dedicated long or short only system will produce. when i said 1.2 was an edge (always in systems) i traded many systems as professionally that were no better than that and made clients money, no complaints. so anything near that or better is a good edge in my book. especially if you get use to the system and start to see where you can add on or take off more contracts - this alone will boost profits like crazy. but it takes time with a model to learn it. hope i answered your question in there somewhere..