What is your winning rate in share market
In this post we discuss about What is your winning rate in share market are you a looser or a winner trader in stock market. Most of the trader in market lose money according to 90 90 90 maxim in market.
Winning Rate ≠ Success
You know what’s funny?
Many traders obsess over their winning rate, thinking it’s the key to success. But let me tell you, it’s not as straightforward as it seems.
Prepare for a laughter-filled journey through some eye-opening examples!
Example 1: Winning rate in share market
Imagine you have a stunning 90% winning rate.
You’re practically a trading wizard, right?
Well, let’s see. Each time you’re right, you earn a measly $1. But when you’re wrong, oopsie daisy, you lose a whopping $20! Now, let’s check out the outcome of your next ten trades…
Win, win, win, win, win, win, win, win, win, and… lose.
And drumroll, please 
… Your profit and loss statement goes like this:
+$1, +$1, +$1, +$1, +$1, +$1, +$1, +$1, +$1, -$20 = -$11
Surprise!
A 90% winning rate DOES NOT exactly make you a profitable trader when your risk to reward ratio is out of whack.
“But wait!” you might exclaim, “I’ll just aim for a fantastic risk to reward ratio like 1 to 10!“
Oh, honey, hold your horses. Brace yourself for the next knee-slapper!
Example 2: Winning rate in share market
Picture this: You have a pathetic 10% winning rate.
Yes, it’s not looking great. Whenever you’re right (rare, I know), you manage to bag a sweet $5. But when you’re wrong (which is quite often), you lose a measly $1.
Here’s what your next ten trades look like…
Lose, lose, lose, lose, lose, lose, lose, lose, lose, and… win!
Now let’s peek at your profit and loss statement:
-$1, -$1, -$1, -$1, -$1, -$1, -$1, -$1, -$1, +$5 = -$4
You see, even with a shiny risk to reward ratio, if your winning rate is in the dumps, your dreams of profits will follow suit.
So, what’s the grand lesson here?
Your winning rate and risk to reward ratio are like stand-up comedians performing solo acts. Useless on their own! To make moolah in the long run, you need to blend these factors together.
Now you must be asking, “But what’s the magical balance of winning rate and risk to reward ratio?“
Well, hold your breath (and your laughter) because there’s a simple formula for that!
Expectancy = (average gain x probability of gain) – (average loss x probability of loss)
Allow me to illustrate with another rib-tickling example:
Example 3:
Your winning rate: 40%
Your losing rate: 60%
Average gain: $500
Average loss: $300
Let’s crunch the numbers with our formula:
Expectancy = ($500 x 40%) – ($300 x 60%)
Expectancy = $20
Drumroll, please! This means you can expect to make an average of $20 per trade.
Woo-hoo!
If you execute 100 trades (yes, you’re a busy bee), you can expect to fill your piggy bank with around $2,000 (calculation: $20 x 100 = $2,000).
So, as you can see, your expectancy (or edge) depends on both your winning rate and risk to reward ratio.
It’s a comedy duo that determines your trading success!
Remember, the number one rule of trading is having an edge.
BASED ON MY DAY TRADING STRATEGY
Also, remember those trades I was showing you months ago that netted me and over 1:30 risk to reward ratio?
The average gain is roughly 1:5.
Here is how the calculation for those would look like:
Your winning rate: 55%
Your losing rate: 45%
Average gain: $1,500
Average loss: $300
Let’s crunch the numbers with our formula:
Expectancy = ($1500 x 55%) – ($300 x 45%)
Expectancy = $690
If you execute 100 trades (wow, you’re buzzing around like a hyperactive bee now), you can expect to fill your piggy bank with around $69,000 (calculation: $690 x 100 = $69,000).
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