High Win-Rate Or High Profitability?

Which do you prefer – a strategy which gives you a high win-rate or one which gives you higher profitability?

The answer, of course, is “it depends”.

It really depends on what kind of win-rate we’re talking about and what kind of profitability we’re talking about.

Personally, I would rather a high win-rate. Definitely one that is higher than 50%.

In fact, I ideally would want something that is at least 60% or higher.

I would rather a strategy which gives say a 60% win-rate and an overall 30% gain on account after 100 trades, as compared to a strategy which gives a 40% win-rate and an overall 50% gain on account after 100 trades.

It’s just me.

I don’t like experiencing more losing trades than winning trades.

It’s a mental and emotional thing.

I suppose some traders can accept a less-than-50% win-rate.

But I know myself pretty well. I don’t like to lose more than I win, even if the overall profitability may be higher for a lower win-rate.

There are two main reasons for this:

1. More losing trades leads to emotional vulnerability, and you need to have a really strong mental game to be able to withstand a 40% win-rate.
2. Emotional vulnerability may lead to revenge trading (i.e. taking ill-advised trades which leads to even more losses).