A 95% win rate can hide a very expensive 5%

High win rates feel intuitive. Ninety-five wins out of a hundred sounds better than sixty. But the size of each outcome changes the answer.

Write the payoff next to the probability

In a hypothetical strategy, 95 gains of $1 produce $95. Five losses of $30 cost $150. The win rate is 95%; the result is negative $55 before costs.

Now add positions that have not settled. If the account closes small winners and leaves large losers open, a completed-trade win rate can look excellent for a while.

Read the whole distribution

Track the median trade, average win, average loss, largest loss, and maximum drawdown. Note how capital changes between trades.

A moving average or another indicator does not fix a poorly defined sample. You still need to know which markets were included and whether the rules were chosen after seeing the results.

Compare the strategy with a simple baseline using the same period and capital. If both benefited from one strong trend, the clever-looking method may add less than the chart suggests.

Copy speed matters too. A follower who enters later can inherit much less upside and most of the same downside.

The useful question is how much the strategy earns per unit of risk over a complete sample. Win rate is one column in that table.

Further reading: Prices and order books · Resolution rules · Current fees.

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