Every indicator that draws a Buy arrow can tell you how often that arrow was followed by a rise. Almost none of them tell you how often a randomly chosen bar was followed by a rise over the same window.
The second number is the one that decides whether the first means anything, and leaving it out is how an ordinary rule gets sold as an edge.
WHAT A BASE RATE IS, IN THIS CONTEXT
Pick any bar on the chart at random. Ask whether the close 20 bars later was higher. Do that for every bar in the history and you get a percentage.
In a market that drifted upward over the sample, that percentage might be 51 or 53. It has nothing to do with skill. It is simply what the instrument did over that period, and any rule you invent inherits it for free.
So when a signal reports a 54% hit rate, the honest question is not whether 54 is good. It is whether 54 is better than the number you would have got by doing nothing at all.
A MEASURED EXAMPLE
I built the comparison into an indicator and ran it on ETHUSDT, four-hour candles, full history.
The rule was the most standard one in existence: a weighted moving average crossover, 21 against 65. Scored on whether price closed higher 20 bars after each long signal.
Result across 123 long signals and 10,026 scored bars:
Signal hit rate: 44.7%
Base rate over the same window: 51.1%
Edge: minus 6.4 points
Buying a random bar would have been better than buying that crossover. The short side came out at 49.2% against a base of 48.9%, an edge of plus 0.2, which is indistinguishable from nothing.
This is not a claim that moving averages are useless. It is a claim about that rule, that instrument, that horizon and that period, and the entire point is that you can run the same measurement on your own chart and your own settings rather than take my word for it.
WHY THIS NUMBER IS ALWAYS MISSING
Partly because it is unflattering. An indicator that displays "54% - base rate 53% - edge +1" is much harder to promote than one that displays "54% WIN RATE".
Partly because computing it correctly takes a little care. The base rate has to be measured over the same forward window as the signal, on the same data, with no lookahead. A signal fired 20 bars ago can be judged now; one fired 3 bars ago cannot, and counting it would quietly inflate the result.
And partly because most people have never been shown that the comparison exists. Once you have seen it, hit rates on their own become unreadable.
THREE THINGS WORTH CHECKING ON ANY SIGNAL
How many signals is the percentage based on? Twelve signals at 60% is noise. A hundred and twenty at 45% is information.
What is the base rate over the same window? If it is not stated, the hit rate cannot be interpreted, and the person who omitted it either did not compute it or did not like it.
Does the hit rate say anything about profit? No. Direction and magnitude are different questions. A rule that is right 60% of the time can lose money steadily if the 40% loses more per event than the 60% gains, and none of this measures costs or slippage.
WHAT WE DO WITH THIS
We publish forecast intervals rather than signals, and we score them the same way: a stated 50% range should contain the outcome about half the time. Across 56 resolved forecasts ours contained it 47 times, which is 84% and which is a failure - an interval that catches almost everything carries no information. We published that number rather than the flattering version of it.
Same discipline in both cases. A number is only meaningful next to the number it should be compared against.
Educational content only - not financial advice.