Why Your Winning Rate Is So Low

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There are reasons why your winning rate in Forex market is so low and what you can do about it.

1. You don’t understand the natural behavior of the market

You should know that not all markets are created equal for example stock market, if you look through any long-term chart, for example, the U.S. stock market you know that it’s in a long-term uptrend, so we have pull back along the way, we have recessions but in the grand scheme of things, in the long run, it’s in an uptrend so if you don’t understand this natural phenomenon of the stock markets, and you’re looking to short whenever there’s a pullback when there’s the price making a 20-day low or as a correction, and you shot the stock markets what you’re gonna find is that you will you know be losing consistently because of this natural phenomenon of the stock. 

Markets are an uptrend heading higher so understand the natural phenomenon of the markets that you’re trading and that should help improve your winning rate so for example in the stock market whenever there’s a pull back there’s a correction, and you’re looking to buy. That will improve your win rate by quite a fair bit, so it’s important to understand right the behaviour of the markets that you’re trading is more towards a momentum trending market or is it more of a market that reverses, every time at the previous day high or the previous week high.

2. You adopt trailing stop-loss.

There’s nothing wrong with using a trailing stop-loss, but if you use a trailing stop-loss you have to be prepared to incur a lower winning rate. The purpose of a trailing stop loss is to give the trade some buffer, so you can catch a trend but, as you know, for most markets it doesn’t trend the moment you put on a trailing stop loss, it trends when it wants to trend, it ranges when it wants to range.

So you should expect that you don’t catch a trend on every single trade. By using a trailing stop-loss technique there’s always a good chance where you have some open profits and then to see the market erode it and hit your trailing stop loss and you end up with a lose watching a winner become a loser so that using a trailing stop loss or rather trying to be a trend follower you will no doubt have a lower winning rate as well.

3. Your stop loss is small relative to your target. 

So if you have like a five pip stop loss and, let’s say, 100 pip targets that’s a very done favourable risk to reward risking like a dollar to make twenty dollars, but here’s the downside is that you should expect to be often wrong, you will often see your five flip stop-loss getting hit there maybe if you got lucky the market will eventually know go to your target and reach 100 pips. The nature is that if you have a tight stop loss relative to your target, you should also expect a very poor winning rate on your system. 

 One more important thing is this is actually with regard to the trailing stop-loss. You might have a low winning rate, but it doesn’t mean that your trading system is a losing system because, for example, trend followers have a winning rate in the realm of you know 30 to 40 may be slightly higher than 45, but the reason why trend followers are profitable is that their winners are much larger than your losers, so, for example, if out of 10 trades 7 are losers you lose a dollar age, so you’re down seven dollars but for the remaining three trades every time you win you make five dollars.

So you can see that three trades multiplied by five that’s a gain of fifteen dollars minus the seven dollars that you incur from your losses earlier you’re still up a net gain of eight dollars. The key thing is not really to focus on winning rate nor to have a very high winning rate, but rather to strike a balance betw between your winning rate and your average gain to losses that is really what matters as a trader. More interesting information on my YouTube channel.

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This post is also available in: Indonesia Português

About the author Rayner Teo

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