# Understanding Trading Win/Loss Ratio: Definition, Formula, and Examples

![Win/Loss Ratio](https://www.investopedia.com/thmb/bzWsKGndWXqbpMAyQdRvMman-Pw=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/win-loss-ratio-final-57ea3bec93d94b80b4d30a224a3813e1.png)

*— Investopedia / Zoe Hansen*

> **Definition**
>
> The win/loss ratio compares the number of winning trades to losing trades, helping traders evaluate the effectiveness of their trading strategies over a specific period.

## What Is the Win/Loss Ratio?

The win/loss ratio compares the number of winning trades to losing trades. The ratio helps traders see how successful their strategy is. Traders often use it with the win rate to determine a trade's overall profitability. While it is a useful measure, the win/loss ratio doesn’t show how much money is actually gained or lost.

### Key Takeaways

*   The win/loss ratio compares winning trades to losing ones, showing a trader's success rate.  
    
*   A win/loss ratio over 1.0 indicates more winning trades than losing trades.  
    
*   The ratio does not account for the monetary value gained or lost in trades.  
    
*   Combining win/loss and risk/reward ratios helps assess trading success and risk profile.  
    
*   Even with a high win rate, a poor risk/reward ratio can lead to losses.

## Calculating the Win/Loss Ratio: A Simple Guide

$\text{Win/loss ratio} = \frac{\text{Wins}}{\text{Losses}}$

The win/loss ratio can also be stated as _winning trades : losing trades._

## Insights From the Win/Loss Ratio in Trading

The win/loss ratio is used mostly by [day traders](https://www.investopedia.com/terms/d/daytrader.asp) to assess their daily wins and losses from trading and as a way to gauge the success of the trading strategy that they used.

For example, if the win/loss ratio shows more wins than losses, then they might continue using their current strategy, all other things being equal. If the ratio shows more losses than wins, they might review and fine-tune their trading strategy to address why they had those losses.

The win/loss ratio is often used with the win rate, which is the number of trades that make money out of the total number of trades conducted. Together, the win/loss ratio and the win rate can help traders understand the probability of their trading being profitable.

### Understanding and Interpreting Win/Loss Ratios

*   A win/loss ratio of more than 1.0 means that a trader had more winning trades than losing trades.
*   A win/loss ratio of less than 1.0 means that a trader had more losing trades than winning trades.
*   A win/loss ratio equal to 1.0 means that a trader had the same number of winning trades as losing trades.

> **Important**
>
> Active traders should make it a habit to regularly review their win/loss ratios, risk/reward ratios, and win rates to stay on top of their trading efforts and avoid losing too much money. Essentially, win/loss ratios and win rates can alert you to how often you are winning or losing money on your trades.

## Example of Calculating Win/Loss Ratio 

Let's say you made 30 trades: 12 won, and 18 lost. This would make your win/loss ratio 12/18, which equals 0.67. Such a ratio means that you are losing 67% of the time. Using the benchmarks above, .67 is less than 1.0 and an indication of a less-than-winning strategy.

Along with that figure, the win rate, or probability of success, is 12/30, or 40%.

### Integrating Win/Loss and Risk/Reward Ratios for Success 

The [risk/reward ratio](https://www.investopedia.com/terms/r/riskrewardratio.asp) shows a trade's profit potential compared to its loss potential. The profit potential of a trade is determined by the difference between the [entry price](https://www.investopedia.com/terms/e/entry-point.asp) and the targeted exit price (at which a profit will be made).

Traders use a stop-loss order at the target exit price, and profit is the difference between the entry point and stop-loss price.

For example, a trader purchases 100 shares of a company for $5.50 and places a stop loss at $5.00. The trader also places a sell limit order to execute when the price hits $6.50. The risk on the trade is $5.50 - $5.00 = $0.50, and the potential profit is $6.50 - $5.50 = $1.00. The trader is, thus, willing to risk $0.50 per share to make a profit of $1.00 per share after closing the position.

The risk/reward ratio is $0.50/$1.00, which equals 0.5, meaning the risk is half of the potential payoff. If the ratio is greater than 1.0, it means the risk is greater than the profit potential on the trade. If the ratio is less than 1.0, then the profit potential is greater than the risk.

Together, the win/loss ratio and the risk/reward ratio can provide a trader with a good idea of their trading success and risk profile. For example, these ratios can help them determine whether they should temporarily stop trading due to lack of successful trades and financial losses or keep trading based on positive results.

In addition, having a high win rate (again, winning trades/total trades) doesn't necessarily mean a trader will be successful or even profitable if the risk-reward ratio is very high. And a high risk-reward ratio may not mean much if the win rate is very low.

## Recognizing the Limitations of Win/Loss Ratios

Although the win/loss ratio is used to determine the success rate and probability of future success of stock traders, it is not very useful on its own because it does not take into account the monetary value won or lost in each trade.

For example, a 2:1 win/loss ratio means there are twice as many wins as losses. Sounds good, but if the losing trades have dollar losses three times as large as the dollar gains of the winning trades, the trader has a losing strategy.

## What Does the Win/Loss Ratio Imply?

The win/loss ratio can indicate performance success as a trader and a probability of future success. It can also point to the effectiveness (or lack thereof) of trading strategies.

## Is a High Win/Loss Ratio Good?

Generally, yes. It means that there were more trades that made money than trades that lost money. Bear in mind, though, that it says nothing about the amounts of money made or lost. For instance, you may have 15 winning trades and five losing trades for a positive win/loss ratio of 3.0. However, those five losing trades may have cost you more than the 15 winning trades made you.

## What Is the Win/Loss Ratio If I Have Zero Losses?

In such a case, you wouldn't bother to calculate a win/loss ratio (or any other ratio) because dividing a number by zero results in an undefined result.

## The Bottom Line

The win/loss ratio helps traders see how often they win compared to how often they lose. But it doesn't tell them how much money they win or lose. Traders can use it to evaluate their strategies and make changes, but should combine it with the risk/reward ratio and win rate for better success. A high win/loss ratio doesn’t guarantee profit if losses are bigger than gains, so it shouldn’t be the only measure traders rely on. Regularly reviewing these metrics can help traders make smarter, more adaptable decisions.