A lot of people look at a trading strategy and think: “If it wins most of the time, it must be profitable.”

But that's not how trading works. Your win rate only tells you how many trades were successful. It doesn't tell you how much money you made or lost overall.

Imagine you make 10 trades and win 7 of them. Your win rate is 70%, which sounds very good.

But what happens if your winning trades are small and your losing trades are much bigger?

7 winning trades × $10 = +$70

3 losing trades × $50 = -$150

Final result: -$80

You were right 7 times out of 10, but you still lost money.

Now let's look at the opposite situation.

You make 10 trades and only win 4. Your win rate is just 40%.

But your winners are much larger than your losses:

4 winning trades × $100 = +$400

6 losing trades × $20 = -$120

Final result: +$280

You were wrong 60% of the time, but you still made money.

This is why experienced traders look at much more than win rate. They care about the risk/reward ratio, the average size of winning and losing trades, trading fees, position size and maximum drawdown.

A strategy with a high win rate can still be dangerous if one losing trade can erase the profits from many previous wins.

And a strategy with a low win rate can be profitable if the winners are large enough compared with the losses.

So when someone says:

“My strategy wins 80% of the time.”

Don't immediately assume it's profitable.

Ask a much more important question:

“How much do you make when you're right, and how much do you lose when you're wrong?”

Because in trading, being right more often doesn't always mean making more money.