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 36% in-sample and 37% out-of-sample, at a fixed 2:1 reward-to-risk. They are effectively the same, which is a better result than a fall would have been — the in-sample number benefits from the same data the system was refined on, so a gap would have measured fitting. What did not hold steady is the return: the out-of-sample period made three times as much, which is the number to distrust.

The win rate each risk-reward ratio needs, and what gold actually delivered, is in does the risk-reward ratio actually work?