Please be careful not to fall into the winrate fallacy trap. A high win rate of 90% does not mean that a strategy will be successful, a low win rate of 10% does not mean that a strategy is poor. The reason is, it comes down to the average reward to win ratio.
You must understand the statistics of reward to risk ratios vs win rates to know if your trading strategy has a statistical edge, and ours does. I use a 4:1 reward to risk ratio and therefore my minimum requirement is a 20% win rate.
Let me explain further:
Let’s imagine you are trading the DAX with a 25 point stop loss and you want to get 100 points profit with a ‘set-and-forget’ strategy. You will either win 100 points, or lose 25 points. Your reward to risk ratio is 4:1. Now image you took 100 trades and of those trades you won 23 of them. That would be a 23% win rate. Is that a profitable strategy?
Your first answer might be no, right? Because 23% sounds very low. But that’s not the case:
23 trades x 100 points = 2300 points profit
77 trades x 25 points = 1925 points lost
Result: 375 points profit (ignoring spreads and commissions)
The point that I am trying to make here, is that win rate is connected to reward to risk. And I use a 4:1 reward to risk strategy. This means I only need to win 1 out of 5 trades to break even – that means I only need a 20% win rate to break even, but I have been trading nearer to 40%.
So that’s why people subscribe to this strategy (or the signals).