A high win rate attracts many traders like a halo, but it often turns out to be a gentle trap. Those pursuing a high win rate often make small profits when winning but suffer heavy losses when losing. This model of winning little and losing much leaves wealth hanging by a thread.
For example, a trader raises their win rate to 90% with skill, envied by many. However, an extreme market event, like a tsunami, can wipe out their account, leaving neither profit nor capital, reducing the account to zero. A high win rate can collapse instantly in the face of reality.
The core secret to profitability with a low win rate—strategy.
Increase positions with the trend, maximizing profits.
Traders decisively increase positions when the market is favorable. They understand that correct market conditions should be seized for profits to soar; one profitable trade can cover multiple losses.
Asynchronous stop-loss, timely severing to survive.
Once the direction is wrong, they never hesitate and immediately stop-loss. Rather than stubbornly holding onto losses, it's better to stop-loss in time to leave capital and opportunities for the next trade.
Key to trading: risk-reward ratio greater than win rate.
A low win rate is not scary; a low risk-reward ratio is fatal. Some traders have a win rate of only 40%, but their return on investment is more than 10 times the losses, resulting in a net account value tripling in a year. Trading is not like a game where the goal is to win more; it’s more like war, allowing for failure but cannot result in 'total collapse.' As long as the risk-reward ratio is high, a few correct trades can turn the tide.
Abandon the four major cognitive biases.
High win rate ≠ expert: The market is complex, and no one can be right forever; one must not ignore risks due to a high win rate.
Don't cling to battles, timely stop-loss: Losses are like snowballs, getting bigger the longer they are delayed; decisively stop-loss upon discovering mistakes.
Profit increase, securing victory: When encountering good market conditions, don’t be timid; double down on profitable trades and let profits run.
Value the risk-reward ratio: A high win rate is an illusion; the risk-reward ratio is the key to trading success or failure.
Methods for achieving financial freedom with a low win rate.
Quick stop-loss: If something feels wrong, decisively cut positions and preserve capital for new opportunities.
Profit increase: When trades are correct and profitable, decisively increase positions to amplify profits.
Accept failure: Trading is not about pursuing perfection; treat failures as tuition fees and continuously improve.
Develop a risk-reward ratio strategy: Combine personal style with the market to create a personalized risk-reward ratio strategy.
In trading, pursuing a high win rate can lead to pitfalls and being harvested by the market. True winners accept failure and focus on the risk-reward ratio, being 'low win rate' experts. Seizing one correct opportunity can turn things around.