DEFINITION
Win Rate
The percentage of trades that close profitably. A common misleading metric — high win rates with low RR can be less profitable than low win rates with high RR.
Example
Strategy A: 70% win rate, 1:0.5 RR → expectancy = 0.7×0.5 − 0.3×1 = +0.05R. Strategy B: 40% win rate, 1:3 RR → expectancy = 0.4×3 − 0.6×1 = +0.6R. B is 12x more profitable.
Related terms
Edge
A statistical advantage in a trading strategy that produces positive expected value over a large sample of trades. Without an edge, even perfect discipline cannot produce long-term profitability.
R-Multiple
A normalized unit measuring trade outcome as a multiple of initial risk. If you risked $100 and made $300, that's a +3R trade. Allows comparing trade quality regardless of position size or account size.
Risk-Reward Ratio
The ratio of potential profit to potential loss on a single trade. A 1:3 RR trade risks $1 to make $3. Strategies with RR above 1:2 can be profitable even with win rates below 50%.
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