Choosing A Forex Signal Provider – A Look At Win Percentage

One would obviously surmise that a trader with a % of winning trades nearing the 100% mark would be a very good bet. Side B then would tell us that a trader with a win % closer to 0% would be a very bad bet. Obviously, winning a great many trades is a good thing, but that would be to oversimplify the matter. The hope of this article is to explain to you why a 95% win rate is way more of a loser than a 65% win rate.

A trader with a 0% – 40% rate, we will classify as low. Let’s take a look at these low traders. The closer they are to 0% in this range undoubtedly the probability is that they are worse than if they were at least higher in the same range. The lower range puts most traders in the category of a losing trader. Occasionally however, you will come across a trader whose modus operandi is to snag large moves with tight stops. This is a trader that has a % that is a very low win rate but can still be considered a successful trader.

Next, let us look at the 40% – 70% range. Most of your winning traders will fall somewhere in here. They win not because the majority of their trades are winners with few losers. It is quite possible that have more losing trades than winning ones. Their success comes from their ability to correctly manage their trades once opened. They take advantage of stops that will then be executed more often than not. This looks for all the world like a losing trade, and it is, but a small loser. The traders that can manage their trades effectively most often are the ones that are able to cut their losses and allow their winners to take off. There are very few traders out there who have the discipline to take advantage of this simple concept.

The last group are those with a very high win % (over 70%). It seems the closer to 100% these traders get, the more people want to trade their signals. Unfortunately the opposite is probably the correct play. These traders win an incredibly high amount of the time because they often take profit off of the table as soon as it appears. This strategy is fine if you also plan to cut losses in that manner. But traders with 95% win rates and above do not have this strategy in mind. Rather than accepting a small loss and moving on with their day, they will let a loser run indefinitely and even add to that position in many cases. This eventually wipes out months or more of winning trades all at once and in the end has no chance of success. One 500 pip loser wipes out 500 one pip winners. Keep in mind that this trader would have well over 99% winning trades and still be an over all loser.

The point of this article is not to say that no one outside of the predetermined range can possibly be a winning trader. Surely many people can and do win with a win % outside of my range. I just want to warn you that if someone has a 95% win rate you should stand aside and hope not to get hit by any debris when they eventually implode.

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