The most expensive misunderstanding in trading: a high win rate feels like an edge and often isn't. Plot your win rate against your reward:risk and see which side of the breakeven curve you're really on — the defaults are a real strategy that won 78% of its trades and made nothing.
The defaults are a real measured example: a live strategy with a 78% win rate at 0.34R that sat almost exactly on this curve — thousands of trades, net flat. A high win rate is not an edge; the only number that pays is expectancy.
Expectancy per trade (in R, where 1R = the amount you risk) = win rate × reward − (1 − win rate) − costs. Setting that to zero gives the breakeven win rate: (1 + costs) ÷ (1 + reward). At 1R reward you need just over 50%; at 0.34R you need about 78% — before costs.
That last example is measured, not hypothetical: a live strategy averaging 0.34R with a 78% win rate graded net-flat across six years of data — thousands of trades that summed to nothing, because it sat exactly on this curve. Add leverage to a zero edge and you don't get zero, you get losses, since costs and liquidations only cut one way.
Only if its average winner is big enough. At 90% win rate the breakeven reward is about 0.11R before costs — most strategies advertising 90%+ win rates take profits so early that they sit near that line, and fees push them under it. The win rate alone contains no information about profitability; expectancy is the only number that pays.
The average amount you make or lose per trade, expressed in R (multiples of what you risk). Expectancy = win rate × average win − loss rate × average loss − costs. A strategy with +0.05R expectancy over thousands of trades compounds; one with −0.05R bleeds out regardless of how often it wins.
Because taking profits early and letting the occasional loser run raises the win rate while destroying the reward:risk — the classic many-small-wins, fewer-larger-losses shape. In grading data across thousands of submitted strategies, this is the single most common failure pattern: the win rate looks like proof, and the expectancy is negative after costs.
More than feels natural. A 60% true win rate can easily print 50% or 70% over 30 trades by chance alone. Under ~100 trades, treat any measured win rate as a rough draft; a strategy graded on a handful of trades is a story, not a statistic.
This curve is one input. A real verdict checks expectancy, costs, robustness across assets, drawdown and overfitting — the five gates every strategy we grade must pass.
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