How to improve the profit and loss ratio while increasing the winning rate?

The primary purpose of all investors entering the foreign exchange market is to make a profit. In order to achieve the purpose of making a profit, investors usually strive to develop in two directions: to increase the winning rate of the transaction or to increase the profit-loss ratio of the transaction. But between the two, in addition to the left and right legs that constitute expectations, there is also a check and balance relationship with each other. If you pursue a higher winning rate excessively, the profit-loss ratio will decrease; on the contrary, if you pursue a higher profit-loss ratio excessively, the winning rate will decrease. Therefore, how to correctly choose the winning rate or the profit-loss ratio is particularly important.

win rate and profit loss ratio

First, clarify the definition of winning rate and profit-loss ratio:

Winning rate X = all times of profit / total number of transactions x 100% profit-loss ratio Y = average amount of profit / average amount of loss.

On this basis, the overall profit and loss is: total profit and loss Z = all times of profit * average amount of profit - all times of loss * average amount of loss.

According to the above formula, it can be simply concluded that under the condition that the profit-loss ratio is 1:1, the higher the investor's winning rate, the more profits he will get. But if the amount of each loss is much greater than the amount of profit, then no matter how high the winning rate is, it will be useless, so how can we improve the profit-loss ratio? (Let's look at the picture below)

Find the key pressure level, put the stop loss at the previous high, and if you make mistakes six times out of ten, even if you lose too much, then your profit and loss will remain the same, but if you do it right once, then your profit will also be the same Yes, if you are right, then five or six times your profit will continue to expand, so what you need to improve is your winning rate.

Winning rate and profit-loss ratio, they are like a pair of twin brothers, they affect each other's expected value of a strategy, in the limited number of transactions, what we need to ensure is that the profit is more than the loss, and find a balance between the two. When you can choose a certain trading strategy by comprehensively considering the winning rate and profit-loss ratio, you will be one step closer to success.

The winning ratio and profit-loss ratio in trading are issues that everyone who is engaged in trading thinks about all day long. This issue is like height and weight, which are related but not closely related.

First of all, it is necessary to know what the winning rate and profit-loss ratio are.

The winning rate is a data calculated by dividing the total number of winning transactions by the total number of losing transactions after counting the number of profits and losses during the review after many transactions, which belongs to the category of after-the-fact summary.

The profit-loss ratio considers how many points the future profit and loss are expected to be before placing an order in a transaction. The estimated profit points divided by the estimated loss points are an estimated data. When reviewing after the event, it will be calculated by dividing the take profit points by the stop loss points. Generally, more considerations are taken into consideration when making decisions, and statistics will also be counted when reviewing the market after the event.

Going back to the origin of things, the currency market is the ratio of currency pairs in various countries, just like 1 US dollar can be exchanged for 6.8 RMB, the transaction is only an exchange ratio, because the exchange ratio will change every moment over time If there is a change, there will be a price difference, and transactions often use this price difference to make profits.

The purpose of each person's trading is different. Some are to stabilize the exchange rate, some are to hedge risks, and some are to make profits. In terms of speculative profits, the winning rate and profit-loss ratio are only considerations. Not much of a direct relationship. But from a psychological point of view, I hope to make 100 orders, the winning rate is 100%, and the profit-loss ratio is 100:0. But from the actual situation, the simple pursuit of winning ratio and profit-loss ratio does not make much sense. The ultimate goal is to make more and more funds in the account. Various pursuits that are inconsistent with the ultimate goal are a waste of time and energy. ,money.

In addition, taking intraday trading as an example, hundreds of orders are traded a day, and the profit-loss ratio of each order is not high, but the overall winning rate is high, and the account amount is still increasing every day. There are not many orders, and there are not many orders in a month or even a year. Among them, only one order may make a profit, and all others will lose money. However, the profit of this order minus the sum of all loss orders is still very profitable. Just like Soros once summed up his trading experience: the depth of profit is far more important than the frequency of profit.

Therefore, before making a transaction, first understand what you are ultimately pursuing and what kind of trading style you are, and then consider which indicators are the most important. Instead of simply pursuing a high winning rate, it is better to understand yourself first, otherwise you will drift with the tide and be taken away by the market, going up and down for a while, like a roller coaster, your heart is going through tests every moment.

Trading is only a part of life. It may be fun or a tool for making a living. All activities that make life better should be encouraged and supported.