Risk to reward and win rate: why you can lose more than you win and still profit

Your edge per trade, called expectancy, is: win rate x average win - loss rate x average loss (in R, where 1R is your risk).

Example: you win 40% of trades at 2.5R and lose 60% at 1R. Expectancy = 0.4 x 2.5 - 0.6 x 1 = +0.4R per trade. Over 100 trades at 0.5% risk that is about +20% before costs.

Now a 70% win rate with 0.3R wins and 1R losses: 0.7 x 0.3 - 0.3 x 1 = -0.09R. A high win rate can still lose money.

Costs matter: spread and slippage take a fixed amount from every trade, so strategies with small targets suffer most. Test with the expectancy and losing-streak calculators and read how risk changes your pass chance.

Education only. This is not financial advice. Trading gold with leverage involves a high risk of losing money.

Practise it for free

Learn step by step with the interactive Academy: charts you can tap, drag and replay, with a Coach and a free certificate.