Thursday Trader's Tip: Matching Win Rate & Risk-to-Reward with Your Unique Trading Strengths
Thursday Trader's Tip editions offer quick trading psychology advice that can be digested in 5 minutes.
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Let’s get to today’s edition.
Most traders, especially in the first years, pursue a trading strategy with the highest win rate possible.
This is an attempt to save themselves from the pain of losses which they still struggle to cope well with.
Today, I want to give you some insight into how the win rate and risk-to-reward relate to the trader’s personality.
If you want to read more on matching strategy with personal traits and strengths, visit the posts below:
Written Version:
Win rate or risk-to-reward alone doesn’t equate with performance.
Strategies with a high percentage win rate are easier to trade from a psychological standpoint. They offer shorter losing streaks and longer winning streaks, allowing traders to take on more risk.
On the other hand, low-percentage winning rate strategies normally offer better risk-to-rewards. Even during extended periods of losses, the trader is confident the next win will outweigh the multiple small stacked losses.
With a high percentage winning rate strategy, the power of a win isn’t so big, and it represents smaller increments in the equity curve.
There’s only one takeaway: win rate or risk to reward alone doesn’t define the quality of performance.
There’s only the best strategy for your individual traits, strengths, and trader character.
It’s up to the trader to match strategy with personality, and for this, it’s crucial to know yourself as a person.
For instance, if you are patient, composed, calm, and thoughtful, you might benefit more from a high-risk-to-reward strategy because you can endure losing periods.
If you’re more energetic and impatient, enjoy a strong activity, and thrive on pressure, then a high win-rate strategy might just suit you best.
In my experience, traders often dismiss themselves in the “edge triangle,” as shown above; they only consider the market and the strategy components.
They see their personality as an obstacle to performance. Therefore, they over-adjust to what they see on social media, missing the point of trading: the trader is the one who materializes the edge.
This is typical of perfectionist traders who struggle to accept weaknesses and want to be perfect at all times, with all trading styles and possible market conditions.
But trying to be good at everything is a losing game, as we know.
The faster you accept who you are — your traits, strengths, and weaknesses — the faster you are ready to make the most out of your strategy.
Great theoretical results won’t matter if you can’t trade the system well.
A career trading the wrong strategy is a career of denial of your true essence as a person. You will never know what you’re truly capable of under such circumstances.
Acknowledge yourself as an essential element of your edge, and you’ll be working in the smartest way.
Peaceful trading,
Sara
P.S. If you liked what you’ve read, give a try to the paid plan (I think you’ll love it 💕):
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