What is win rate in trading?

What it means

A 90% win rate is achievable trivially by taking tiny profits and letting losers run, and it describes a strategy that will eventually be destroyed by one trade. A 35% win rate with a 3:1 payoff is a strong system. The number is meaningless without the payoff ratio beside it.

Why it matters

It is nonetheless the number most heavily marketed, because it is the most intuitive and the easiest to make look impressive. Any product advertising a win rate without a corresponding average win and average loss is selecting the flattering half of the picture.

What this changes in practice

Our validated win rates are 44.8% in-sample and 36.5% out-of-sample, at a fixed 2:1 reward-to-risk. The out-of-sample figure being lower is the honest and expected result — the in-sample number benefits from the same data the system was refined on, and the gap between the two is a measure of how much of the original figure was fitting.