What is win rate? how to measure my trades win rate?
Trading is one of the best ways to earn money in cryptocurrency. However, professional traders know that not all trades are profitable. For many newbies, the big question is, how do traders evaluate their performance? If you are a professional trader, you know that win rate is the criterion for traders to evaluate their performance.
Win rate is a word, but it is affected by many factors. Some of these factors are controllable, and some are not. That's why it's not always profitable to trade. Join us to define the term and see what factors can increase your number of successful trades.
What is Win Rate?
Every trader must have a trading strategy before opening any position. This article will not look at trading strategies but a strategy's performance. Every trading strategy is sometimes profitable and sometimes unprofitable. Traders use the win rate to determine the profit or loss of any trading strategy.
Win rate means what percentage of your trades close with a profit. For example, if the win rate is 70% trading strategy, that is, out of 100 trades that we make with this method, 70 trades of them will be taken out with a profit, and 30 of them closed with a loss. It is not about profit. We may exit one trade with one percent profit and withdraw another transaction with a 1000 percent profit. Win rate refers only to the success rate of transactions, not the amount of profit.
Before we look at the win rate more closely, you should know that the win rate is closely related to the two concepts of stop loss and take profit.
What is Stop Loss?
Stop loss is the maximum loss you can take in a trade. It would be best to close a position when your loss exceeds this limit. Undoubtedly, the worst thing a trader can do is trade without stop-loss. The cryptocurrency market is volatile, and you can suffer heavy losses at any time without stop-loss.
There is no exact rule for determining stop loss, and traders mostly choose this number based on their personal opinion or experience. However, stop loss is usually less than ten percent.
What is Take profit?
Now that we know what Stop Loss is, we have to move on to another concept called Take profit to find the connection between the two ideas with win rate. Take profit is the amount of profit you expect from each trade. In other words, once you reach this level of profit, you can exit the trade. Of course, many professional traders do not leave the trade after reaching the take profit but move it to higher prices. There is no specific rule for determining take profit, and it should be achieved according to the market or experience.
Win rate relation with stop loss and take profit
There is a concept in trading known as risk/reward. The risk/reward ratio concept represents the probability that an investor can make a profit for every risk they invest in it. A trader with a risk-to-return ratio of 7 to 1 is willing to risk $ 1 for a profit of $ 7. This number is obtained by dividing the stop loss by the take profit.
The formula for risk to reward is to divide your net profit (reward) by the price of your maximum risk.
By dividing the net profit (reward) by the maximum price, the risk/reward is calculated.
Win rate formula
Risk is inversely related to reward. Any trader can set stop-loss and take-profit well by understanding the win rate. Do you know how? Let's give an example. If you are a trader with a stop loss of 10% and a take profit of 40%, your risk-to-return ratio is 4: 1. If such a number is assumed to be X, you can calculate your win rate as follows:
Win rate = 100 / (1 + X)
This formula shows well that if you know your approximate win rate, you can adjust your trading strategy accordingly to make a profitable trade. For example, if your win rate is 70%, the value of X will be 0.43 for you. These two numbers are inverted, and decreasing the win rate makes you have more risk and choose a bigger stop loss. For example, for a 30% win rate, the risk/reward should be 2.33.
How to increase the win rate?
The increasing win rate depends on several factors. However, the most important thing is to consider emotions in trading. Fear and greed are the biggest cause of loss in trading strategies, and without controlling these two feelings, you cannot make money in the cryptocurrency market.
A human cannot live without this feeling, and in some hours after many trades, he suffers from these feelings even more. Of course, mistakes in trading are inevitable. However, professional traders with a high win rate try to enter the market less but with less loss. The secret to their success is the use of trading tools.
A trading bot is one of these useful tools that can help you. Trading tools have no emotion and do their trading according to determined trading strategies without getting involved with fear and greed. Another special feature of these tools is that they do not make manual mistakes of traders. The bot is a machine and has no errors. It makes your trades naturally (and without changing trading strategies) have a higher win rate than manual trades.
Win rate shows the success and failure of a trader and is one of the most important criteria for determining the status of a trader and changing trading strategy. You will succeed if you control feelings and trade with a proper strategy. However, if you cannot do this, or your win rate is very low for any reason, it is better to find a better way. What could be better than using a trading bot to increase win rate!