Podcast:

Do win rates really matter? 

In this video:

00:31   Two Sides To The Story

02:31   Going Back To The Basics

04:10   Two Webinars for New and Experienced Traders

Does your win rate really matter? Let's talk about that and more right now.

 

Hi there, Forex traders. It's Andrew Mitchem here, the Forex trading coach. Today is Friday, the 14th of August. In today's video and podcast, I want to talk about a subject that eventually had 2 emails about just this week. It's about your win rate. How many trades out of 10, let's say, for example, are you profitable on, and does that really matter?

 

Two Sides To The Story

 

Like most things, there's 2 sides to the story here, and I'd like to read out just some extracts from two of those emails. The first one is from Hadish, and he says, “Look, Andrew, I'm looking for some form of trading system or trading signals that are going to make me money on 7 or 8 out of 10 trades.” Just park that for one moment, and then I'll read you an extract and the second email was from Robert, and Robert said to me, “Andrew, I'm able to make money from my trades, but then I'm finding that they're turning against me. The problem is that my losing trades end up staying in the market for too long and being big losing trades, and then I end up cutting short my winning and my profitable trades.”

 

Robert is saying he's ending up with around a 7 or 8 out of 10 winning trades, but the problem is, like he says here, is that his losing trades run into the thousands of dollars, yet his profitable winning trades are only running into the hundreds of dollars, and so there's an obvious problem.

 

Like Robert says here, “I need to find a way to cut my losses short and end up being profitable,” because, you see, when you think about that, the first email from Hadish wants 7 or 8 out of 10 winning trades. Robert's got that; yet, he's losing a lot of money.

 

Again, it comes back to the question and the topic that I've mentioned. Do win rates really matter?

 

From a psychological point of view, well, obviously, you don't want to be, let's say, losing 9 out of 10 trades, even though you could still be profitable. That's probably not really what people are after, but it also goes to show that when people come to me and they say, “Hey, Andrew, what's your win rate, or are you winning 80% of the time?” it's not really quite as important as most people think it is.

 

Going Back To The Basics

 

To me, it comes back to the basics that I talk about. The basics are:

* You have very low risk per trade

* You have higher reward to risk from your trades

That means that if your trade has been a profitable trade, it's making … depending on the trade and the time frame of the chart you're trading, but you need to be making that sort of 2, 3, or 4 times your risk when you have profitable trades.

 

With the low risk, I mean that you have a set percentage risk on every trade. The problem is that Robert was having his losing trades being massive losing trades. That just shouldn't happen because you should have a controlled risk on each trade, so it's X percent of your account. In my case, it's always half of 1%, so on a $10,000 account, let's say, the most you can lose on any one trade is $50. If you think about having the high returns on each trade, it means that you're making $100 or $150 or $200 on a profitable trade, yet you're only risking $50 on that trade, so you know the very worst you can do.

 

What I highly recommend, Robert especially, you do is you download my Lot Size calculator. It's freely available on my site. It's a fantastic tool, and it helps to keep your risk under control a...