The short answer: what you make per trade is your win rate times your average win, minus your loss rate times your average loss. If your losers are much bigger than your winners, a high win rate can't carry them. Win 64% of the time with losers 2.5 times the size of your winners and every hundred trades loses money. The fix is rarely a better entry. It is usually smaller losers.
Call your win rate p, your average winner W and your average loser L (as a positive number). What one average trade is worth — its expectancy — is:
Expectancy per trade = p × W − (1 − p) × L
Set that to zero and you get the win rate you need just to break even. It depends only on your payoff ratio, R = W ÷ L:
Break-even win rate = 1 ÷ (1 + R)
| Average winner ÷ average loser (R) | Win rate you need to break even |
|---|---|
| 0.4 (losers 2.5× winners) | 71.4% |
| 0.5 (losers 2× winners) | 66.7% |
| 1.0 (same size) | 50.0% |
| 1.5 | 40.0% |
| 2.0 | 33.3% |
| 3.0 | 25.0% |
Read the first row: with losers two and a half times your winners, winning 64% of the time isn't enough. You would need 71%. That gap is where the money goes — before commissions and slippage, which only raise the bar.
Take 64 trades: 41 winners and 23 losers, a 64% win rate. The average winner made $29.30 and the average loser lost $73.27 — 2.5 times as much. Forty-one winners bring in about $1,201; twenty-three losers take out about $1,685. Net: about −$484.
The losers were also held far longer: about 18 minutes on average against about 3 minutes for the winners — 5.4 times as long. Nothing about the entries is broken. The exits are.
Now suppose every loss had stopped at $30. Twenty of the twenty-three losers were bigger than that. Capped there, the same 64 trades finish about +$539. That is a best case — it assumes the trade would have been stopped at $30 rather than shaken out of a winner first — but it shows where the leak is.
These are the numbers from the sample trade history on PlainSight's leak check, which works the same arithmetic on your own file.
Selling winners quickly and holding losers is common enough to have a name. Hersh Shefrin and Meir Statman called it the disposition effect in 1985 — "the disposition to sell winners too early and ride losers too long." Terrance Odean then measured it in the trading records of 10,000 accounts at a large discount brokerage: investors realized their gains at a markedly higher rate than their losses (14.8% of available gains against 9.8% of available losses).
A loser held in the hope it comes back is a loss that keeps getting bigger, and a winner sold the moment it's green is a gain that never gets the chance to. Do both often enough and you get exactly the shape above: lots of small wins, fewer but larger losses, and a high win rate that still loses.
Sources: Shefrin, H. and Statman, M. (1985), "The Disposition to Sell Winners Too Early and Ride Losers Too Long: Theory and Evidence," Journal of Finance 40(3), 777–790, doi:10.1111/j.1540-6261.1985.tb05002.x. Odean, T. (1998), "Are Investors Reluctant to Realize Their Losses?" Journal of Finance 53(5), 1775–1798, doi:10.1111/0022-1082.00072.
Any trade history that has dates, symbols, sides, sizes and prices — or a profit and loss column — can give you all three. Pair the buys and sells into round trips first if your broker lists them separately.
Drop your broker's export on the leak check and it gives you these three numbers and one sentence about where the money goes, in seconds. It runs in your browser: the file is never uploaded, and there's no account to make.
Find the leak in your trading → Or see the full journal on a sampleThis guide is educational information about reviewing your own trading records. It is not investment advice, and nothing here is a recommendation to buy, sell, or hold any security. Past performance does not predict future results.