The win/loss ratio would be 4, but the trades in aggregate would have resulted in a net loss of $900. For example, a trader may execute five trades, with four generating a total profit of $100 and the remaining generating a loss of $1,000. A trader may have a favorable win/loss ratio but still have a losing trading strategy. The win/loss ratio only considers the number of trades and not the dollar amount of trades. Key Limitation of the Win/Loss RatioĪlthough the win/loss ratio is an easily calculable ratio to determine the success rate of trades, there is one key drawback: it does not consider the actual dollar amount in each trade. It should be noted that achieving a high win/loss ratio does not necessarily indicate a successful trading strategy. It indicates that the trader had more unsuccessful trades than successful trades. It indicates that the trader had more successful trades than unsuccessful trades. It indicates that of the trades initiated, 50% were profitable. The win/loss ratio is used solely to determine the ratio of successful trades to unsuccessful trades over a given period. Losses refer to the number of unprofitable trades over the specified period.Wins refer to the number of profitable trades over the specified period.
To calculate the win/loss ratio, use the formula below: A win/loss ratio that exceeds 1 indicates that of the trades made, at least half were profitable.Achieving a high win/loss ratio does not necessarily indicate a successful trading strategy.The win/loss ratio is a ratio of the number of profitable trades over unprofitable trades.
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