Trading

A 75% win rate can earn nothing: payoff size, costs and luck decide whether a trading record pays. Win rate only counts how often trades finish ahead; it ignores how much each win and loss is worth. This guide defines win rate, average win and loss, reward-to-risk and R-multiples, then shows the expectancy formula and a break-even win rate table for six payoff ratios. Worked examples compare a 75% and a 35% win rate, with and without a $5 per-trade cost. It also covers why high win rates can hide rare large losses, how long losing streaks arise by chance, and how wide the confidence interval is around 55 wins in 100 trades.

Position size, stop gaps and margin decide whether a losing streak dents an account or ends it. Risk management cannot remove the chance of ruin, but it sets how large a single loss, a gap and a run of losses can get. The article works one example from a $25,000 account: a 1% risk budget becomes 100 shares with a stop $2.50 below entry, then a gap to $44 turns the planned $250 loss into $600. It compares ten straight losses at 1%, 2% and 5% risk per trade, adds up open risk across five positions, and explains the current FINRA margin rules, including the replacement of the pattern day trader $25,000 requirement. A closing checklist turns the numbers into pre-trade questions.