Hello traders! This week I’d like to talk about a topic that comes up in every Online Trading Academy class that I teach – that is the topic of your win/loss ratio. Most new traders (and many experienced ones!) believe that a very high win/loss ratio is necessary to be a profitable trader. This is very far from the truth.
First let’s define what a win/loss ratio is. Investopedia defines the win/loss ratio as: “A ratio of the total number of winning trades to the number of losing trades.”
It does not take into account how much was won or lost, simply if they were winners or losers.
If you make ten trades and have six winners and four losses, your win/loss ratio is 6:4 or 3:2, or even 60%. Many new traders think this number is too low! Why do they think that? In my opinion one of the primary factors that make people think this number is too low is that they compare it to the same grading scale that they have had in their regular education experience. In the schools that I grew up in, if you only scored 60% you were a “D” student, bordering on failing. For those of you who aren’t familiar with our basic grading schedule, scoring between 90% and 100% is an A, 80-89% is a B, 70-79% is a C, 60-69% a D, and below 60% is an F or failing… Continue Reading
