which one do traders with experience use when measuring gains on trades?
These things are hard to isolate as they are all connected through the mechanism of the strategy selected.
A viable strategy tends to have either a low r:r and a high win rate, or a high r:r but a low win rate. Both strategy approaches can be profitable but its hard to devise anything which has high values for both at the same time.
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what isthe process for collecting data like this? is this manual?
R:R is also expressed in R-multiple. Example: 1:1.5 is R1.5, 1:3 is R3.
Win rate is correlated to the trade expectancy of the R-multiple. Example: R1 = <50% (paying a spread). A R1.5 has <33.3% win rate.
Your trading or stretgy’s Edge is your actual win rate minus the expected win rate.
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For trader struggling to raise their equity curve, its important to remember two things.
Firstly, you can have a good return on your capital with modest statistics - win rate, r:r and % risk per trade. Even account capital.
Secondly, you will multiply your profits exponentially if you re-invest them in your trading account. don’t spend your winnings.
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I suggest you have a look at typical prop firm funding requirements as a guide to measuring successful trading. Most of them emphasise low drawdowns, which are hardly talked about as performance criteria.
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when does one get to spend their winnings?
The plan would be to start spending them when your annual profits exceed the amount you need to live on. At that point you don’t need any other income. But only spend the excess profits above your bills for the year.
i don’t consider myself an experienced trader ,but i do believe that；
1.R:R=pure oneself fantasial illusion,because they are unplan-able
2.win rate=its totally random ,you may say you have 80% winrate at long run ,but seriously? why are you still not rich ?
managing your risk is what i believe in the first 10 yrs in learning,but it doesn’t bring any profit neither,this game is hopeless .
Damn… Babypips has me misspelling basic words now (*strategy’s)
Correct. If you made $10 from an expected $9 winner, that would be an edge of 11%. ($1 divided by $9). The ‘expected win rate’ is derived from the odds of a 50/50 outcome, a W or L.
In an efficient market, win rate is directly correlated to R:R ratio. Higher than usual volatility will skew the results randomly as you do not know when the High volatility has peaked yet, until is has. If a trader is able to exploit it consistently, that’s an edge.
Market inefficiencies are corrected quickly as liquidity is limited. Once liquidity demand corrects the inefficiency of market pricing, the inefficiency is gone. This could be milliseconds or a few seconds after the event.
Most common is a group of pending orders can create ‘transitory volatility’ in the example of stop loss orders; in which the orders skew market pricing away from efficiency by the need to trade immediately.
Great to hear! How on earth did you make a 99% win rate strategy?
If at 1:1 it’s getting 58+%, that’s amazing! How many consecutive losses did you take in the 1:1 RR system?
I hope not to come off as an ass… I just wish someone showed me these numbers when I started. I always went after 1:3+ trades only… like BabyPips says. Then losing trade after trade and trying to find what I did wrong.
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I use Sharpe ratio which is mean gains divided by their variance. The higher this ratio, the better, it means you achieve good returns with low risk.
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thank you. long way to go for me
i know a lot of people do this
for myself, i find it unnecessarily complicated
plain old “profit factor” has always been good enough for me: total pluses divided by total minuses - if it’s over 1.0 you’re making an overall profit, and the higher it is, the better
some professional scalpers have a much higher win-rate than 80%, and have done for years - even decades
some are rich, others not
win-rates on their own don’t make anyone rich
it’s very easy to have a system with even a 90% win-rate that loses money consistently
just open positions completely at random with a 5-pip target and a 45-pip stop-loss and let every trade run until the price hits one or the other: in the long term, that will obviously have a 90% win-rate, but it will also obviously lose money, for sure!
it’s not about win-rates in isolation
my own criteria for judging what to be interested in, for my own account, are that i’ll take seriously any method that has an independently verifiable PF above 1.3, and a win-rate above 55% (not necessary in itself, of course, but i hate very long losing runs and patches!) and a high enough trading-frequency to be worth using
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My measure of choice for evaluating potential profitability is expectancy. The good Dr Pipslow in this article gives a useful example in dollar amounts but I prefer calculation as a percentage of risk R.
Multiply your wins percentage by your average win amount as a percentage of R. Now multiply your loses by your average loss amount as a percentage of R. Take out the latter from the former.
The result is what you can ‘reasonably’ expect as an AVERAGE outcome of each trade. Negative over a substantial number of trades means no go. Positive but under 0.10 means you’re around break even after paying the spread. Above 0.10 starts smelling good.
But like @flamingoproxy I prefer a win rate higher than 55% if only for the sake of my psychological wellbeing!
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for me, that’s certainly quite a big part of it, indeed
there’s another factor, too - it’s absolutely essential for me to have a pre-defined way of knowing, if i hit a bad run, whether it’s just because i’ve hit a predictable, reasonable, foreseeable, unlucky bad run, or whether what i’m doing has stopped working
the practical reality is that with a low win-rate that’s TERRIBLY difficult to decide, and that’s a scenario i must avoid for the sake of my account-balance as well as my nerves!! 
That’s a very pertinent point!