What a 70% Win Rate Actually Means
Win rate is the most advertised and least informative number in trading. On its own it tells you almost nothing about whether a system makes money.
A signal service advertising a 70% win rate sounds compelling. It is also perfectly compatible with losing money steadily, and the reason is simple arithmetic.
The number that is missing
Win rate tells you how often you win. It says nothing about how much. Consider a system winning 70% of the time, gaining 10 per win and losing 30 per loss:
Per 100 trades: 70 wins × 10 = 700. 30 losses × 30 = 900. Net: −200.
A 70% win rate that loses money. Meanwhile, a system winning 35% of the time, gaining 40 and losing 10, produces 1,400 against 650 — a comfortable profit on half the win rate.
Expectancy
The figure that actually matters combines both:
Expectancy = (Win rate × Average win) − (Loss rate × Average loss)
This gives what you earn per trade on average. Positive expectancy means the system makes money over enough trades. Nothing else determines that.
Why high win rates are often a warning
The easiest way to raise a win rate is to take tiny profits and let losses run. Both make the equity curve worse.
Very high advertised win rates frequently indicate one of a few things: targets so close that transaction costs dominate, no stop loss so positions are held until they eventually recover, or martingale-style position increases that produce a long run of small wins ending in one account-clearing loss.
A 90% win rate should prompt the question "what happens on the other 10%?" more urgently than any other.
Sample size
A 70% win rate over 20 trades means almost nothing. Random variation alone produces streaks like that routinely. You need hundreds of trades before a win rate estimate carries much information, and the shorter your holding period the more trades you need.
The psychological trap
High win rates feel good, and that feeling has real cost. Traders often gravitate toward systems that are frequently right rather than systems that are profitable, because being right is more comfortable than making money slowly with a 40% hit rate.
Trend followers live at 35–40% and make money from a few large winners. Their psychological difficulty is precisely that being wrong most of the time is unpleasant even when it works.
What to ask instead
What is the average win, the average loss, the maximum drawdown, the number of trades, and the worst losing streak? Those five figures describe a system. Win rate alone describes nothing.
Educational content only. Not financial advice.
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