2 posts tagged with "performance analysis"

"I have a 70% win rate"

Sounds impressive, right?

But what if I told you that trader is losing money?

Today, I'll reveal the truth about win rate vs profit factor.

What Is Win Rate?​

Definition: Percentage of trades that are profitable

Formula: Win Rate = (Winning Trades ÷ Total Trades) × 100

Example:

• 100 trades
• 60 winners
• 40 losers
• Win Rate = 60%

Simple concept.

What Is Profit Factor?​

Definition: Ratio of gross profit to gross loss

Formula: Profit Factor = Gross Profit ÷ Gross Loss

Example:

• Gross Profit: ₹3,00,000
• Gross Loss: ₹2,00,000
• Profit Factor = 1.5

Higher is better.

The Win Rate Illusion​

Example #1: High Win Rate, Losing Money​

Trader A:

• Win Rate: 70%
• 100 trades: 70 wins, 30 losses
• Average Win: ₹1,000
• Average Loss: ₹3,000

Math:

• Gross Profit: 70 × ₹1,000 = ₹70,000
• Gross Loss: 30 × ₹3,000 = ₹90,000
• Net Loss: ₹20,000
• Profit Factor: 0.78

70% win rate but losing money!

Example #2: Low Win Rate, Making Money​

Trader B:

• Win Rate: 40%
• 100 trades: 40 wins, 60 losses
• Average Win: ₹4,000
• Average Loss: ₹1,500

Math:

• Gross Profit: 40 × ₹4,000 = ₹1,60,000
• Gross Loss: 60 × ₹1,500 = ₹90,000
• Net Profit: ₹70,000
• Profit Factor: 1.78

40% win rate but making money!

The Real Math​

The Breakeven Formula​

For breakeven: Win Rate × Average Win = Loss Rate × Average Loss

Solving for Win Rate: Win Rate = (Average Loss ÷ Average Win) × Loss Rate

Examples​

If Average Win = Average Loss:

• Win Rate needed: 50%
• Any win rate > 50% = Profitable

If Average Win = 2 × Average Loss:

• Win Rate needed: 33.3%
• Any win rate > 33.3% = Profitable

If Average Win = 0.5 × Average Loss:

• Win Rate needed: 66.7%
• Need win rate > 66.7% to be profitable

Real Trading Examples​

Example #1: Scalping Strategy​

Characteristics:

• High win rate (65%)
• Small wins (₹500 average)
• Small losses (₹400 average)
• High frequency (50 trades/month)

Math:

• Win Rate: 65%
• Average Win: ₹500
• Average Loss: ₹400
• Profit Factor: (65 × 500) ÷ (35 × 400) = 2.32
• Monthly Profit: ₹8,250

High win rate, good profit factor

Example #2: Swing Trading Strategy​

Characteristics:

• Moderate win rate (45%)
• Large wins (₹3,000 average)
• Moderate losses (₹1,200 average)
• Low frequency (10 trades/month)

Math:

• Win Rate: 45%
• Average Win: ₹3,000
• Average Loss: ₹1,200
• Profit Factor: (45 × 3000) ÷ (55 × 1200) = 2.05
• Monthly Profit: ₹5,400

Lower win rate, good profit factor

Example #3: Breakout Strategy​

Characteristics:

• Low win rate (35%)
• Very large wins (₹5,000 average)
• Moderate losses (₹1,500 average)
• Very low frequency (5 trades/month)

Math:

• Win Rate: 35%
• Average Win: ₹5,000
• Average Loss: ₹1,500
• Profit Factor: (35 × 5000) ÷ (65 × 1500) = 1.79
• Monthly Profit: ₹2,750

Low win rate, decent profit factor

The Psychology Problem​

Why Traders Obsess Over Win Rate​

1. Ego:

• "I'm right most of the time"
• "I'm a good trader"
• "I'm better than others"

2. Comfort:

• Winning feels good
• Losing feels bad
• High win rate = less pain

3. Misunderstanding:

• Think win rate = profitability
• Ignore profit factor
• Focus on wrong metric

The Reality Check​

Profitable traders often have:

• Win rates 40-60%
• Profit factors 1.5-3.0
• Focus on profit factor

Unprofitable traders often have:

• Win rates 60-80%
• Profit factors 0.8-1.2
• Focus on win rate

Optimizing Your Trading​

Step 1: Calculate Your Metrics​

Track these numbers:

• Win Rate
• Average Win
• Average Loss
• Profit Factor
• Total P&L

Example tracking:

Month 1: 60% WR, PF 1.2, +₹5,000
Month 2: 55% WR, PF 1.4, +₹7,000
Month 3: 50% WR, PF 1.6, +₹8,000

Step 2: Identify the Problem​

If Profit Factor < 1.0:

• Problem: Average loss too high
• Solution: Improve stop losses

If Profit Factor 1.0-1.5:

• Problem: Average win too low
• Solution: Let winners run more

If Profit Factor > 1.5:

• Problem: Win rate too low
• Solution: Improve entry criteria

Step 3: Optimize Based on Results​

Focus on profit factor, not win rate

Example optimization:

Before: 70% WR, PF 0.8 (losing)
After:  50% WR, PF 1.8 (profitable)

Trading Style Analysis​

Scalping (High Win Rate)​

Target Metrics:

• Win Rate: 60-70%
• Profit Factor: 1.5-2.5
• Frequency: High

Key: Small, consistent wins

Day Trading (Moderate Win Rate)​

Target Metrics:

• Win Rate: 50-60%
• Profit Factor: 1.8-2.5
• Frequency: Medium

Key: Balanced approach

Swing Trading (Lower Win Rate)​

Target Metrics:

• Win Rate: 40-50%
• Profit Factor: 2.0-3.0
• Frequency: Low

Key: Large wins, small losses

Position Trading (Low Win Rate)​

Target Metrics:

• Win Rate: 30-40%
• Profit Factor: 2.5-4.0
• Frequency: Very low

Key: Very large wins

Common Mistakes​

Mistake #1: Chasing Win Rate​

Wrong: "I need 80% win rate"
Right: "I need profit factor > 1.5"

Mistake #2: Ignoring Profit Factor​

Wrong: Only tracking win rate
Right: Track both metrics

Mistake #3: Cutting Winners Short​

Wrong: Taking profits too early
Right: Let winners run to targets

Mistake #4: Letting Losers Run​

Wrong: Hoping losers come back
Right: Cut losses quickly

Mistake #5: No Tracking​

Wrong: Guessing performance
Right: Track all metrics systematically

The Optimal Balance​

The Sweet Spot​

For most traders:

• Win Rate: 45-60%
• Profit Factor: 1.8-2.5
• Focus: Profit factor over win rate

Why This Works​

1. Realistic Win Rate:

• Achievable consistently
• Not too much pressure
• Allows for losses

2. Good Profit Factor:

• Profitable over time
• Compensates for losses
• Sustainable approach

3. Psychological Balance:

• Not too many losses (depressing)
• Not too few wins (frustrating)
• Manageable emotions

Real Trader Profiles​

Profile #1: The Perfectionist​

Characteristics:

• Win Rate: 80%
• Profit Factor: 0.9
• Problem: Takes profits too early
• Solution: Let winners run more

Profile #2: The Gambler​

Characteristics:

• Win Rate: 30%
• Profit Factor: 0.7
• Problem: Lets losers run
• Solution: Cut losses quickly

Profile #3: The Balanced Trader​

Characteristics:

• Win Rate: 55%
• Profit Factor: 2.1
• Problem: None
• Solution: Continue current approach

The Bottom Line​

Win rate is vanity. Profit factor is sanity.

Focus on:

• Profit factor > 1.5
• Reasonable win rate (40-60%)
• Consistent execution
• Long-term profitability

Ignore:

• High win rates without profit
• Ego-driven metrics
• Short-term performance
• Other traders' win rates

Remember: You can't spend win rate. You can spend profits.

Take Action Now​

This Week:

1. Calculate your win rate and profit factor
2. Identify which needs improvement
3. Set specific goals

This Month:

1. Track both metrics daily
2. Optimize based on results
3. Focus on profit factor

This Quarter:

1. Measure improvement
2. Adjust strategy if needed
3. Share results with community

👉 Track Your Win Rate & Profit Factor in TradeLyser
👉 Download: Performance Analysis Template
👉 Next: How to Handle a Losing Streak

What's your win rate vs profit factor? Which one needs improvement? Share below.

You have multiple trading strategies.

But which one actually makes you money?

You think you know—but do you really?

Let's find out using data, not gut feeling.

The Multi-Strategy Problem​

Common Scenario​

Trader: "I trade breakouts, pullbacks, and mean reversion"

Question: "Which works best?"

Answer: "Umm... they all work... sometimes?"

Problem: No data. Just hope.

Why This Matters​

Trading multiple strategies without comparison:

• Wasting time on losers
• Under-utilizing winners
• No clear focus
• Inconsistent results

With proper comparison:

• Identify best performers
• Eliminate losers
• Focus effort efficiently
• Maximize returns

What to Compare​

Category 1: Different Setups​

Example:

• Strategy A: Breakout trading
• Strategy B: Pullback entries
• Strategy C: Mean reversion

Question: Which has highest win rate? Best R:R? Most consistent?

Category 2: Same Setup, Different Conditions​

Example: Breakout trading in:

• Condition A: Trending markets
• Condition B: Ranging markets
• Condition C: High volatility markets

Question: When does my setup work best?

Category 3: Same Setup, Different Timeframes​

Example: Moving average crossover on:

• Timeframe A: 5-minute chart
• Timeframe B: 15-minute chart
• Timeframe C: Daily chart

Question: Which timeframe suits me?

Category 4: Same Setup, Different Instruments​

Example: Pullback strategy on:

• Instrument A: NIFTY futures
• Instrument B: Bank NIFTY futures
• Instrument C: Stock options

Question: Where's my edge strongest?

Category 5: Entry Variations​

Example: Breakout entry at:

• Entry A: Immediate break
• Entry B: Pullback after break
• Entry C: Confirmation candle

Question: Which entry timing is optimal?

Key Metrics to Compare​

Metric #1: Win Rate​

Definition: Percentage of winning trades

Formula: (Winning Trades / Total Trades) × 100

Example Comparison:

Strategy A (Breakouts):     58%
Strategy B (Pullbacks):     64%
Strategy C (Mean Reversion): 51%

Winner: Strategy B (highest win rate)

But: Win rate alone doesn't tell full story...

Metric #2: Average Win vs Average Loss​

Why it matters: High win rate with small wins can still lose money

Example:

Strategy A:

• Win Rate: 70%
• Avg Win: ₹2,000
• Avg Loss: ₹5,000

Math:

• 7 wins × ₹2,000 = ₹14,000
• 3 losses × ₹5,000 = -₹15,000
• Net: -₹1,000 (losing despite 70% win rate!)

Strategy B:

• Win Rate: 50%
• Avg Win: ₹5,000
• Avg Loss: ₹2,500

Math:

• 5 wins × ₹5,000 = ₹25,000
• 5 losses × ₹2,500 = -₹12,500
• Net: +₹12,500 (profitable with 50% win rate!)

Lesson: Average win/loss matters more than win rate.

Metric #3: Profit Factor​

Definition: Gross profit / Gross loss

Formula: Total Winning ₹ / Total Losing ₹

Interpretation:

• PF < 1.0: Losing system
• PF = 1.0: Break-even
• PF 1.0-1.5: Marginal
• PF 1.5-2.0: Good
• PF 2.0-3.0: Very good
• PF > 3.0: Excellent (verify it's real)

Example Comparison:

Strategy A: PF 1.2 (marginal)
Strategy B: PF 2.4 (very good)
Strategy C: PF 0.9 (losing)

Winner: Strategy B

Action: Stop using Strategy C

Metric #4: Expectancy​

Definition: Average amount you expect to win/lose per trade

Formula: (Win Rate × Avg Win) - (Loss Rate × Avg Loss)

Example:

Strategy A:

• Win Rate: 60%
• Avg Win: ₹4,000
• Loss Rate: 40%
• Avg Loss: ₹2,000

Expectancy: (0.6 × ₹4,000) - (0.4 × ₹2,000) = ₹2,400 - ₹800 = +₹1,600/trade

Strategy B:

• Win Rate: 55%
• Avg Win: ₹3,000
• Loss Rate: 45%
• Avg Loss: ₹2,500

Expectancy: (0.55 × ₹3,000) - (0.45 × ₹2,500) = ₹1,650 - ₹1,125 = +₹525/trade

Winner: Strategy A (higher expectancy per trade)

Metric #5: Maximum Drawdown​

Definition: Largest peak-to-trough decline

Why it matters: Tells you worst-case scenario

Example:

Strategy A: Max DD 12%
Strategy B: Max DD 8%
Strategy C: Max DD 22%

Winner: Strategy B (lowest drawdown = less risk)

Psychology: Can you handle 22% drawdown? If not, avoid Strategy C even if profitable.

Metric #6: Sharpe Ratio​

Definition: Risk-adjusted return

Formula: (Return - Risk-Free Rate) / Standard Deviation

Simplified: Higher Sharpe = Better risk-adjusted returns

Example:

Strategy A: Sharpe 1.2
Strategy B: Sharpe 1.8
Strategy C: Sharpe 0.7

Winner: Strategy B (best risk-adjusted returns)

Metric #7: Consistency​

Measure: % of profitable months

Example:

Strategy A: 7/12 months profitable (58%)
Strategy B: 9/12 months profitable (75%)
Strategy C: 5/12 months profitable (42%)

Winner: Strategy B (most consistent)

Psychology: Consistent strategies are easier to stick with.

Metric #8: Trade Frequency​

How many trades per month/year?

Example:

Strategy A: 45 trades/month (high frequency)
Strategy B: 12 trades/month (moderate)
Strategy C: 3 trades/month (low frequency)

Consider:

• Higher frequency = More opportunities, more stress
• Lower frequency = Fewer opportunities, less stress
• Match to your lifestyle

How to Run a Comparison in TradeLyser​

Step 1: Tag Your Strategies​

For all past trades:

1. Go to Journal
2. Select trades
3. Add strategy tag:
   • "Breakout-Trending"
   • "Pullback-Uptrend"
   • "Mean-Reversion"
4. Save

For future trades:

• Tag during entry or review

Step 2: Open Strategy Comparison​

1. TradeLyser → Strategy Book
2. Click Compare Strategies
3. Select strategies to compare (2-5)

Step 3: Set Time Period​

Choose:

• Last 3 months
• Last 6 months
• Last 1 year
• All time
• Custom range

Tip: Use at least 30 trades per strategy for statistical significance.

Step 4: View Comparison Dashboard​

TradeLyser shows side-by-side:

Step 5: Analyze Visually​

Charts available:

• Equity curve (cumulative P&L over time)
• Win rate by month
• Average R:R comparison
• Drawdown comparison
• Trade distribution

Look for:

• Which curve is smoothest? (consistency)
• Which grows fastest? (profitability)
• Which has smallest dips? (risk management)

Step 6: Deep Dive​

Click any strategy for details:

Market Conditions:

• Works best in: Trending up
• Works worst in: Choppy/ranging
• Optimal VIX: < 15

Time of Day:

• Best hours: 9:30-11:00 AM
• Worst hours: 2:00-3:30 PM

Instruments:

• Best on: Large cap stocks
• Worst on: Small cap stocks

Entry Quality:

• A+ setups: 72% WR
• B setups: 54% WR
• C setups: 38% WR

Step 7: Make Decisions​

Based on data:

Strategy A: ⭐ Primary strategy (best metrics) Strategy B: ⭐ Secondary (good alternative) Strategy C: ❌ Stop using (marginally profitable)

Real Comparison: Case Study​

Rahul's Three Strategies​

Background:

• Trading for 2 years
• Using 3 different approaches
• Feels inconsistent
• Wants to focus

Strategies:

1. Morning Gap Trading
2. Afternoon Breakouts
3. EOD Swing Entries

The Comparison​

Data: 18 months, 342 total trades

Results:

Key Discoveries​

1. Afternoon Breakouts: LOSING Strategy

• Despite occasional big wins (₹6,200 avg)
• Win rate too low (42%)
• Losses too large (₹4,800 avg)
• Negative expectancy: -₹220/trade

Action: STOP using this strategy

2. Morning Gap Trading: BEST Strategy

• Highest profit factor (2.8)
• Great win rate (68%)
• Controlled losses (₹1,900)
• Positive expectancy: ₹1,820/trade
• Most total profit: ₹2.67L

Action: Make this PRIMARY strategy

3. EOD Swing: GOOD Secondary

• Highest expectancy (₹2,884/trade)
• But lowest frequency (67 trades vs 147)
• Good for diversification
• Different timeframe = non-correlated

Action: Keep as SECONDARY strategy

Rahul's New Plan​

Before:

• 3 strategies, equal focus
• Net: +₹4.32L (with one loser dragging down)

After (6 months):

• Strategy 1 (Morning Gaps): 80% focus
• Strategy 2 (EOD Swing): 20% focus
• Strategy 3 (Afternoon): ELIMINATED
• Net: +₹3.87L in 6 months (vs ₹4.32L in 18 months)
• 3x faster growth rate

Rahul's words: "I was wasting 40% of my trades on a losing strategy. Comparison showed me the truth. Now I only trade what works."

Advanced Comparison Techniques​

A/B Testing Strategy Variations​

Test: Does adding volume filter improve results?

Strategy A (Original):

• Breakout above resistance
• No volume requirement

Strategy A-Modified:

• Breakout above resistance
• Volume > 1.5x average

Run both for 30 trades each

Results:

• Original: 58% WR, ₹1,420 expectancy
• Modified: 67% WR, ₹2,180 expectancy

Conclusion: Add volume filter permanently

Market Condition Segmentation​

Question: Does Strategy A work in all markets?

Segment by VIX:

• Low volatility (VIX < 15): 71% WR
• Medium volatility (VIX 15-20): 58% WR
• High volatility (VIX > 20): 41% WR

Conclusion: Only trade Strategy A when VIX < 20

Time-of-Day Analysis​

Strategy: Breakout Trading

Performance by hour:

9:15-10:00 AM: 64% WR, +₹87,000
10:00-11:00 AM: 68% WR, +₹1,23,000 ⭐
11:00-12:00 PM: 57% WR, +₹34,000
12:00-1:00 PM: 49% WR, +₹8,000
1:00-2:00 PM: 45% WR, -₹12,000
2:00-3:00 PM: 38% WR, -₹34,000
3:00-3:30 PM: 42% WR, -₹18,000

Conclusion: Only trade 9:15 AM - 12:00 PM

Instrument-Specific Performance​

Strategy: Momentum trading

Results by instrument:

• NIFTY 50 stocks: 64% WR, PF 2.3
• Mid-cap stocks: 51% WR, PF 1.4
• Small-cap stocks: 43% WR, PF 0.9

Conclusion: Stick to NIFTY 50 stocks

Common Comparison Mistakes​

Mistake #1: Too Small Sample Size​

Wrong: "I tested Strategy A for 5 trades, it lost, so it's bad"

Right: Minimum 30 trades per strategy for valid comparison

Mistake #2: Different Time Periods​

Wrong:

• Strategy A: Jan-Mar (bull market)
• Strategy B: Jul-Sep (bear market)

Right: Compare same time period (same market conditions)

Mistake #3: Ignoring Risk​

Wrong: "Strategy A made ₹5L, Strategy B made ₹3L, so A is better"

Missing:

• Strategy A: 25% max drawdown
• Strategy B: 8% max drawdown

Right: Strategy B might be better (risk-adjusted)

Mistake #4: Survivorship Bias​

Wrong: Only comparing strategies you're still using (successful ones)

Right: Include abandoned strategies to learn why they failed

Mistake #5: Curve Fitting​

Wrong: Over-optimizing until backtest is perfect

Right: Simple rules that work across different periods

Decision Framework​

When to Keep a Strategy​

✅ Keep if:

• Positive expectancy (>₹500/trade)
• Profit factor > 1.5
• Max drawdown tolerable
• Fits your schedule/psychology
• Enough trade opportunities

When to Modify a Strategy​

⚠️ Modify if:

• Close to breakeven
• Good win rate but small wins
• Or good R:R but low win rate
• Works in some conditions, not others

Action: Test variations, filter trades

When to Eliminate a Strategy​

❌ Eliminate if:

• Negative expectancy
• Profit factor < 1.2
• Inconsistent (random results)
• Max drawdown too large
• Too stressful to execute

Action: Stop immediately, reallocate time

The Portfolio Approach​

Don't rely on one strategy.

Build a strategy portfolio:

Strategy 1 (60% allocation): Best performer, primary focus

Strategy 2 (30% allocation): Good performer, different market condition

Strategy 3 (10% allocation): Testing/development

Benefits:

• Diversification
• Always have something working
• Continuous improvement
• Reduced risk

The Bottom Line​

You can't improve what you don't measure.

You can't choose without comparing.

Guessing which strategy works = Gambling

Knowing which strategy works = Trading

Run the comparison. Make data-driven decisions.

Take Action Now​

Today:

1. Tag your last 50 trades by strategy
2. Run your first comparison in TradeLyser
3. Identify your best and worst performers

This Week:

1. Deep dive into why winners win
2. Understand why losers lose
3. Decide: keep, modify, or eliminate each

This Month:

1. Focus 80% effort on top strategy
2. Test improvements to secondary strategy
3. Eliminate bottom performer
4. Compare results vs previous month

👉 Run Strategy Comparison in TradeLyser
👉 Download: Strategy Comparison Template
👉 Next: Start My Day & Finish My Day Routines

What's your most profitable trading strategy? Have you compared it to others? Share below.