Why a 90% Winning System is a Bad Idea
#521: Why a 90% Winning System is a Bad Idea
In this video:
00:26 – Traders get excited over win rates
01:32 – Small gains and big losses
02:47 – My way of trading
03:34 – Closed trades from this week
04:44 – Book a call with myself and my team
05:01 – Blueberry Markets
I’m going to explain why a 90% winning rate trading system is not a good idea. Let’s talk about that and more right now.
Hey there, Forex traders! Andrew Mitchem here at the Forex Trading Coach. With video and podcast number 521.
Traders get excited over win rates
Now I want to talk about win rates. You see so many people get very excited with win rates and they tend to put almost like too much emphasis on a win rate of a system and the strategy and especially a lot of inexperienced people, they see something that’s got, let’s say, like a 90% win rate and they think has to be the answer to their successes and it has to be a fantastic trading system.
I can tell you that is not the case. Now, a little while ago, I was talking to someone who had a 90% winning system and he was losing quite a lot of money. And as a new trader, you might question like, how is that possible? And as a more experienced trader and a profitable trader, I can tell you the win rate really doesn’t matter quite as much as you may think.
Yes, it’s important, but it is certainly not the most important aspect and the most experienced and most profitable Traders have win rates that are drastically lower than and sometimes pretty quite a lot lower than what you might actually think. Yet, they are very profitable. How has that happened?
Small gains and big losses
Well, the issue with most people is, first of all, they trade with pips and the guy that has the 90% win rate. That was a problem also. But what he was doing was having lots of small gains. Now, let’s use the PIP example and let’s say he had ten trades. Now 90% win rate, of course, means nine out of his ten trades were profitable. Now, let’s say he was making, pick a figure. Ten pips per profitable trade let’s say and again you can see why I don’t trade pips but let’s go with it because that’s what he was doing.
Therefore, nine trades, ten pips profit means even if we’re not worrying about spread and we’re saying that’s ten pips net, which by the way it wasn’t, but let’s say it was to make his system even better, he’s made 90 pips. The problem was that when he had one losing trade, let’s say he lost 100 pips on that trade, he was then negative ten pips, yet he had a 90% win rate system.
And you can only imagine how much damage that would do psychologically when you get smashed by a big losing trade like that. And that becomes the problem.
My way of trading
Now, if you’ve been following me for some time, you would know the first of all, the key to trading. Not only do you need a successful system, but you need to have low and controlled risk per trade and forget pips.
So with my personal trading, I never risk more than half of 1% per trade. But also it’s very important that you have high return trade, so high reward to risk profitable trade. So with the guy that had the 90% winning system but was losing money, he had lots of small gains. One big loss and big losses with me is the opposite.
When I have losses, I have small losses, but when I have gains I have big profitable gains. And that that change of mindset and that flipping around of the wins and the losses is one of the keys to success.
Closed trades from this week
Now, just this week, I’m going to read some examples here. Just this week we’ve had a monthly chart trade close.
We’re now into October that trades been open since March on the ChinaH. The Chinese index that made a 4.3 to 1 reward the risk on that same market. ChinaH we’ve had a weekly trade from last week just closed for profit this week on the weekly chart for a 4.1 to 1 reward to risk on the US Canadian weekly chart.
We’ve had a weekly trade this week that made a 2.4 on the Canadian Yen Daily. This week we made 2.9 on the Australian franc. This Week Daily we made 2.5 on the zinc this week Daily we made 2.2. And so with those trade, you can see that we’re making multiple times our risk. So although we have losses and of course we have losses, we have little small controlled losses, big gains.
So you mentioned like, you know, so stepping up big steps, small losses, big steps, and that is one of the keys to successful trading. That is why you do not need to have a 90% win rate. And that becomes the issue that so many people fall into that trap.
Book a call with myself and my team
Now if you’d like to have a chat with us about how we do this and how we can help you to become a successful trader, too, I’m going to put a link here where you can click on and book a time slot to either talk to myself or one of my team, and we’ll give you lots of helpful information about how we can help you.
If you’re out there looking for a good broker, I highly suggest and recommend blueberry markets. They offer the MT4 and MT5 trading platform with lots of those markets. Like I mentioned, the Zinc and ChinaH and some of those non forex markets also available on there as well. And of course being an MT5 lots of other timeframe charts like 2 hours and six and eight and 12 hour charts as well as standard ones that you get on MT4.
So I hope that helps. I hope that piece of information will massively help you understand what it takes to be a good trader and how you can turn the trading around from probably losing or maybe break even or frustrated to a successful profitable trader.
This is Andrew Mitchem here at the Forex Trading Coach. Look forward to seeing you this time next week. Bye for now!