Your Win Rate tells you how many of your trades are profitable, however this should never be confused with success as a trader.
Many traders with high win rates are not profitable. Many studies have shown that many of the worlds most successful traders have win rates of between 40% and 50%.
Win rates must always be reviewed at the same time as the risk reward (the SIZE of winners compared to the size of losing trades).
Only 2% of our studied traders are successful when their win rate is less than 40%.
When the number of winning trades is substantially less than the number of losing trades, it makes it much harder to break even, as each winning trade has to be a lot larger than your average losing trade.
Additionally, the lower your win rate is, the more likely you will have losing streaks which require strong psychological strength to ensure you stay disciplined.
On the opposite end of the scale, if your win rate is higher than 70% but you are not a profitable trader, then it’s likely you are attempting a “scalping” style of trading where you are taking a lot of small winners which are offset by much larger losing trades.
Remember increasing win rate usually causes a decrease in Risk Reward. Increasing Risk Reward usually causes a decrease in the Win Rate.