Learn
Win rate vs risk-reward: why a 70% win rate can still lose money
Win rate is the number every strategy advertises. It tells you almost nothing on its own.
Short answer
What matters is expectancy: win rate × average win − loss rate × average loss. A trader who wins 7 of 10 at +$100 but loses −$300 on the other 3 is down −$200. A trader who wins 4 of 10 at +$300 and loses −$100 is up +$600. In our NQ tests an “88% win rate” breakout lost money, while a model that won only 34% of trades made money in 9 of 10 years.
Two traders
| Trader A | Trader B | |
|---|---|---|
| Win rate | 70% | 40% |
| Average win | +$100 | +$300 |
| Average loss | −$300 | −$100 |
| Result per 10 trades | 7 × $100 − 3 × $300 = −$200 | 4 × $300 − 6 × $100 = +$600 |
Hypothetical example, before fees.
The same thing in real backtests
| Strategy (NQ futures) | Win rate | Average win / loss | Outcome |
|---|---|---|---|
| “88% win rate” ORB | about 88% | +$347 / −$2,797 | lost money |
| 10AM setup, as taught | 26% | +$678 / −$274 | −$55,180 |
| Midpoint ORB | about 25% | +$2,395 / −$745 | profitable, lumpy |
| 8:30–9:30 range model | 34% | +0.12R per trade | up 9 of 10 years |
The 10AM setup is the instructive one: a low win rate and small winners. Expectancy works out to roughly 0.26 × $678 − 0.74 × $274 ≈ −$30 per trade, before you ever look at the total.
The catch with low win rates
Strategies that win 1 in 3 or 1 in 4 come with long losing streaks: 13 in a row in the 8:30 model, 18 in the midpoint ORB. You need position sizing that survives them, which is why the stop and the size are decided before the trade (see where to put your stop).
Questions
Is a high win rate good in trading?
Not by itself. A 70% win rate loses money if the average loss is three times the average win. Expectancy, which combines win rate with the size of wins and losses, is what decides profitability.
What is a good risk-reward ratio?
There is no single number; it has to fit the win rate. At a 40% win rate, winners about 3× the size of losers made +$600 per 10 trades in our example. At 25%–35% win rates, winners need to be several times larger than losers.
How do I calculate trading expectancy?
Expectancy per trade = win rate × average win − loss rate × average loss. Example: 0.40 × $300 − 0.60 × $100 = +$60 per trade.
Keep reading
Cite this: Trading Decisions Lab, “Win rate vs risk-reward” (Oct 24, 2026). https://www.tradingdecisionslab.com/learn/win-rate-vs-risk-reward
Simulated backtest. Hypothetical or simulated performance results have certain limitations and do not represent actual trading; see the full disclaimer. Past results don’t guarantee future results. Educational only, not financial advice. Futures are leveraged and you can lose more than your deposit.