Definition
Win rate
Win rate is the share of trades that close in profit. Why it means nothing without the average win and loss beside it, and what a good figure actually looks like.
Win rate is the proportion of closed trades that ended in profit, expressed as a percentage. On its own it describes frequency and says nothing about magnitude, so it cannot indicate whether a strategy makes money. A rule winning 90% of the time is unprofitable if the 10% of losses are each ten times the size of a win, and a rule winning 31% of the time is profitable whenever its average win is large enough relative to its average loss.
- Also known as
- hit rate · percentage of winning trades · strike rate
How it is calculated
Win rate = winning trades ÷ closed trades
It is one of four inputs to the number that actually matters:
Expectancy = (Win% × Avg win) − (Loss% × Avg loss)
Break-even win rate = Avg loss ÷ (Avg win + Avg loss)
So at a 2.5:1 win/loss ratio, 29% is break-even — and 31% is profitable.
Worked example: At a 31% win rate with an average win of 1.0% and an average loss of 0.4%: (0.31 x 1.0) - (0.69 x 0.4) = +0.04% per trade before costs.
The number it has to be read with
Expectancy per trade is (Win% x average win) minus (Loss% x average loss). That single expression is what decides profitability, and win rate is only one of its four inputs. This is why QANTERION publishes a win rate next to a maximum-drawdown cap for every strategy — 37% on crypto, 56% on US stocks, 31% on precious metals — rather than publishing the win rate alone, which would be the more flattering choice.
Strategy type sets the range
A short-horizon mean-reversion rule typically wins 30-40% of its trades; a trend-following rule often less; a rule that takes small profits quickly can win 70% and still lose money. There is therefore no universal good figure. The useful question is not whether a win rate is high but whether it is consistent with the strategy family it claims to belong to.
How it gets misread
A high win rate is widely marketed as evidence of a good system, which is exactly why it is the easiest metric to engineer. Closing winners early and letting losers run raises win rate while destroying expectancy, so an advertised figure above about 70% with no average-loss disclosed beside it should lower confidence rather than raise it.
Sources
- A New Interpretation of Information Rate — Bell System Technical Journal (Kelly), hosted by Princeton University
- Good and bad properties of the Kelly criterion — MacLean, Thorp & Ziemba, hosted by the UC Berkeley Department of Statistics
Definitions are educational. Nothing here is investment advice, and no metric described on this page predicts future results.
Definitions are the easy part
Knowing what drawdown means is not the same as having a system that halts on it. QANTERION applies these limits while a strategy runs.