Win/Loss Ratio

The win/loss ratio compares the number of winning trades with the number of losing trades over a defined sample. It answers how many wins occurred for each loss, but it does not show the dollar size of those wins or losses.

Win/loss ratio is useful for trade review, but it should be paired with average win, average loss, position size, costs, and drawdown. A strategy can have more wins than losses and still lose money.

Basic Formula

1win/loss ratio = number of winning trades / number of losing trades

If a strategy has 30 winning trades and 20 losing trades, the win/loss ratio is 1.5. That means there were 1.5 winning trades for every losing trade in the sample.

Example

The first strategy wins much more often, but each loss is large relative to each win. The second strategy loses more often, but a few larger wins may offset many smaller losses. The ratio needs payoff context.

Win/Loss Ratio vs. Win Rate

What To Verify

• whether breakeven trades are included, excluded, or classified separately
• whether the sample size is large enough to matter
• whether costs and slippage are included
• whether trades are equally weighted or weighted by dollars at risk
• whether open positions are excluded or marked consistently
• whether the strategy changed during the measurement period

Common Mistakes

• Treating a ratio above 1.0 as automatically strong.
• Ignoring the average size of winning and losing trades.
• Comparing strategies with different position sizes and holding periods.
• Counting partial exits inconsistently.
• Letting one period of favorable market conditions define the strategy.

Related Terms

• Win Rate: Percentage of closed trades that were gains.
• Risk-Reward Ratio: Planned gain compared with planned loss.
• Position Sizing: Trade size discipline that controls dollars at risk.
• Risk-Adjusted Return: Broader performance measure after considering risk.
• Rate of Return: Realized or expected return measure.