The 90% win rate trap
Short answer. A high win rate is not a sign of a good strategy: it is easy to manufacture while losing money, and the platforms quoting 85% or 90% rarely publish the number that actually matters. Expectancy decides whether trading software profits, so check that, the maximum drawdown and a record you can verify instead.
Last updated . Published by AutoCoin, led by founder James Warwick.
Why does expectancy matter more than win rate?
Expectancy decides whether a strategy profits, and win rate is only one of its four inputs. Expectancy = (win rate × average win) − (loss rate × average loss), and a strategy is profitable when that figure is positive.
90% winners can still lose money
Because win rate ignores trade size: win nine trades at $10 and lose one at $200, and you are down $110 with a 90% win rate. Nothing about the headline number reveals that, which is precisely why it gets advertised.
40% winners can print money
Lose six trades at $50 and win four at $200, and you are up $500 with a 40% win rate. Several of the strongest systematic strategies look like this: frequently wrong, and very profitable, because the winners are far bigger than the losers.
How does software manufacture a high win rate?
Asymmetric exits
The most common method is asymmetric exits. Take profit at a fraction of a percent, and either use no stop loss or a very wide one. Almost every trade eventually closes green until the one that does not, and that one takes back everything.
Averaging down and grid systems
Martingale, DCA-down and grid strategies add to losing positions until the average closes green. Every closed trade counts as a win. The blowup is rare and account-sized when it comes.
Counting only closed trades
A position sitting 40% underwater is not a loss until it is closed, so software holding losers indefinitely can advertise a near-perfect record while the account bleeds.
Choosing the window
Measure a long-only strategy during a bull run and a high win rate falls out for free. The test is how it behaved through a downturn.
What should you check instead of win rate?
What is the maximum drawdown?
Check maximum drawdown first. The worst peak-to-trough fall tells you what holding the strategy actually feels like, and whether you would have stayed with it.
Can I verify the record independently?
Ask how you would check the published results without trusting the company. If there is no answer, the results are marketing. AutoCoin publishes a signed, chained, on-chain-anchored record you can recompute in your own browser.
Is this simulated or live?
Simulated results are labeled as simulations, and the live record is published separately, every day, so you always know which one you are looking at.
Are costs included?
Spreads, funding and fees turn many impressive backtests negative. A result that only survives with optimistic fills is not a result.
Frequently asked questions
Is a 90% win rate possible in trading?
Yes, and it is usually engineered rather than earned. Taking tiny profits while holding losers indefinitely, or averaging down until positions close green, produces very high win rates while expectancy stays negative. The win rate is real; the implication that it means profitability is not.
What is a good win rate for trading software?
There is no good number in isolation. Trend and momentum strategies often win 35% to 45% of trades and profit because winners are multiples of losers. Mean-reversion strategies often win 70% or more and can still lose money if a single loss is large enough. Judge expectancy and drawdown, not the ratio.
How can I tell if trading software's results are real?
Check whether you can verify them without the company's cooperation. Look for results published as a signed, tamper-evident record, ideally anchored to a public blockchain, with costs modelled in. If verification depends on trusting a screenshot, treat the numbers as advertising.
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