A trader with a 35 percent win rate and a trader with a 65 percent win rate can both be solidly profitable, and either one can be quietly broke. Win rate on its own tells you almost nothing about whether a strategy works. It is one of three numbers that only make sense read together, and treating any one of them alone as the verdict is how traders end up either falsely confident or panicking over a number that was never the problem.
Take two traders, each logging 100 trades a month. Trader A wins 65 of them at an average $80 each and loses 35 at an average $180 each. Trader B wins 35 at an average $300 each and loses 65 at an average $90 each. Trader A looks like the better trader on a scoreboard. Run the arithmetic and Trader A is losing money: (65 times $80) minus (35 times $180) comes to $5,200 minus $6,300, a net loss of $1,100 a month. Trader B, with the losing-looking win rate, nets (35 times $300) minus (65 times $90), or $10,500 minus $5,850, a profit of $4,650. The win rate told the opposite story of the P&L.
R multiples put every trade on the same scale
A dollar result means something different on a $10,000 account than a $50,000 one, and it means something different on a 10 pip stop than a 40 pip stop. R multiples fix that: express every result as a multiple of what was risked. A trade that risked $100 and made $250 is a 2.5R winner regardless of account size. Once every trade is in R, average win and average loss become comparable across instruments and across months, and expectancy, the average R per trade, becomes the single number that tells you whether the strategy has a real edge.
Profit factor: the number worth checking first
Profit factor is gross profit divided by gross loss across all trades. A profit factor of 1.0 means you are breaking even before costs, which usually means losing once spread and any fees are counted. A profit factor between 1.3 and 1.5 is a solid, sustainable edge for an active day trader. Above 2.0 over a large sample is excellent and genuinely rare; treat a number that high over fewer than a hundred trades as an unproven streak, not a settled fact.
Expectancy ties the numbers together
Expectancy is win rate times average win, minus loss rate times average loss, and it answers the only question that matters: on average, what does one trade of this type actually pay. A strategy with a 45 percent win rate, an average win of $220 and an average loss of $110 has an expectancy of (0.45 times $220) minus (0.55 times $110), which is $99 minus $60.50, a positive $38.50 per trade. Multiply that by 20 trades a week and the strategy is worth roughly $770 a week before costs, a number that says far more about whether it is worth trading than the win rate ever could on its own.
Reading the numbers as warning signs, not just scores
A win rate above 80 percent is itself a flag worth investigating, not a reason to relax. It often means winners are being cut early out of fear, or losers are being let run past their stop in hope, both of which show up eventually as one outsized loss that erases weeks of small wins. A profit factor sitting right at 1.0 to 1.1 means the edge is real but thin, and it will not survive a period of wider spreads or a run of average execution.