Forex Win-Loss Ratio: Is It Really Imporant?
Losing is part of trading. If someone tells you they have 100 pecent winning trades, you know that they are lying. But did you know that you can have 30 percent of your trades profitable and still put money into the bank?
When focusing on the win/loss ratio only, you are missing the very important component of your average wins vs. your average losses. If your average wins (gains) are 20 pips and your average loss is 20 pips, you must have a win/loss ratio of well over 50% to make any real money in trading. Traders should look for trades that offer a 3:1 reward to risk ratio, but 1.5:1 at the bare minimum. If you take higher quality trades, you don’t have to have a very high win/loss ratio to make actual money in trading.
Imagine you lose 7 trades, with an average of 15 pips. Your total loss is 105 pips. However if the 3 winners each average you 90 pips, you still walk away with a net of 165 pips. Not too bad!