Play the numbers game
Achieving positive trading results doesn’t always depend on having a high win rate. Think about win size: how much you gain when you’re right (and how little you lose when you’re wrong.)
Let’s use the example of a trader who uses a 3:1 reward-to-risk ratio. He gains 3 in winning trades, and loses 1 when he’s wrong.
At this level of reward-to-risk, the trader can have a win rate of 30% and still be profitable.
To prove it, here are the results for that 3:1 trader who wins 3 out of every 10 trades. Because of the favourable R:R, the trader’s account is up even with a win rate that may be considered low.
| Trade Number | Result | Gain/Loss |
| 1 | Loss | -1 |
| 2 | Loss | -1 |
| 3 | Loss | -1 |
| 4 | Loss | -1 |
| 5 | Loss | -1 |
| 6 | Loss | -1 |
| 7 | Loss | -1 |
| 8 | Win | +3 |
| 9 | Win | +3 |
| 10 | Win | +3 |
| TOTAL: | +2 |
The Relationship Between Reward-to-Risk Ratio and Win-Rate
This table shows the minimum R:R and win-rate needed for breakeven.
Use it as a helpful reminder that you can achieve positive results even with a small number of wins, as long as they outweigh the impact of losses.
| Reward to Risk (R:R) | 1:1 | 1.5:1 | 2:1 | 2.5:1 | 3:1 | 4:1 | 5:1 | 10:1 | 20:1 |
| Breakeven Win Rate | 50% | 40% | 34% | 29% | 25% | 20% | 17% | 10% | 5% |
Reading the table from left to right:
If you enter trades with a 1:1 reward-to-risk ratio, your win-rate needs to be better than 50% to be profitable.
If you enter trades with a 1.5:1 reward-to-risk ratio, your win-rate needs to be better than 40% to be profitable.
If you enter trades with a 2:1 reward-to-risk ratio, your win-rate needs to be better than 34% to be profitable.
And so on.