The Math of Winning in Trading

本站添加: 2026-06-02

[00:00:00]Trading is basic math and if you don't understand these four essential concepts, no matter what strategy you use or how good your setups are, you will never become a profitable trader.

[00:00:10]But once you understand them, you'll realize why most traders never become profitable even when they're learning the right strategy. In this video, I'll show you the four mathematical concepts of winning in trading, plus one simple question that will change your trading forever. Let's start. So I want to start with these five sentences and these are going to actually change the way you see trading. First one is most traders and most of you actually chase perfect entries but the real each come from probabilities and math. Individual wins and losses are basically coin flips. So it's a 50/50 for each trade and long-term success is decided by your system math and that's going to be the focus of the video and one trade means nothing. I want you to look at this chart here and this is probably where most of your attention goes. The strategy 40% indicators psychology risk.

[00:01:00]Meanwhile, expectancy gets almost no attention. But it's the number that tells you whether the system actually makes money. That is the problem. It's not a lack of effort, but it's a misdirection of effort. And that's why people spend years in trading, but still stay stuck because they're focusing on the wrong thing. So, let's start with expectancy. What actually makes money?

[00:01:20]Now, expectancy is the only number that matters and it's not how your last trade went, not how clean your last five setups were, and not how confident you felt. Expectancy is simply the average profit you can expect per trade. And the formula goes like this. The win rate times the average win minus the loss rate times the average loss. For example, an 8our system at 15% win rate.

[00:01:47]Sounds very bad, right? you're losing 85% of your trades. But using the math and using the formula, we can see that it can give you a positive 350 per trade. And since the math is positive, it means that you'll be profitable while losing nearly nine out of every 10 trades. Now look at the 3R system. 55% win rate at a 3R using the math is going to give you this. 1,200 per trade. That is positive. Now looking at the 1 hour at 70% weight using the math, it's going to give you 400 per trade. So if you can see that 70% and 15% almost give you kind of the same expectancy. So it's not about the win rate itself and it's not about the R multiple itself. It's the combination of the two that creates the edge. Now why why expectancy matters this much? because it takes your entire strategy into one clear number and instead of saying I think this works you can say this system makes X per trade over a large sample. That is the difference. So simply if the expectancy is positive that mean you have a profitable system. Now there is one thing that most of you forget about.

[00:03:00]Your expectancy on paper is not your real expectancy because every trade has cost. So spread, commission, slippage, all of that cuts into the result. So a strategy can look profitable on paper and still lose money in reality because you're not taking these into account.

[00:03:18]Now let's look at this graph here because this is where most of you actually give up or maybe get fooled.

[00:03:22]for the first maybe 10 or 20 trades, you're not seeing much results. So you're not or you cannot say if this system is good or bad. Only after when we have a large sample, the truth appears. So right here, you cannot say if you have a profitable system or not.

[00:03:39]Sometime it's going to go like this and go up and a lot of noise. But I'm having here a perfect scenario. But only after a large sample, the expectancy appears.

[00:03:48]And now after maybe a 100 trade you can for sure say that okay this is unprofitable system and this is profitable. You might be walking away from a perfectly good edge. So maybe it's going to start like this but then go up and it's going to be profitable.

[00:04:04]You just quit before it start revealing itself. And I want you to remember this because that's going to connect directly to variance which we're going to be covering later. So now the question becomes how do you actually build a profitable system? The answer is a trade-off, one that most traders never fully accept. There is no perfect strategy. Every system comes with a trade-off. Higher reward usually means lower win rate and higher win rate usually means smaller reward. That is the reality of trading. And this is where many trader get stuck because they keep looking for a system that gives them both. It does not exist. Now based on the chart, we can see the expectancy per trade for different system. This system has an 8R and 15% win rate. And we're going to be covering the uh relationship between the two. This has a 6R and 30% win rate. So if you can notice, these are very close to each other. This is a 6R 30%. This is a 3R 55%. And even there is a big difference when it comes to the win rate, but they're very close when it comes to the expectancy. And even a 15% win rate and a 70% win rate are also very close to each other. Now look at the chart here.

[00:05:13]This is the reward to risk here and the win rate here. As the target gets bigger, the win rate drops. And it's not because you're doing something wrong, but because that's how the market work.

[00:05:24]The further price has to travel, the less often it gets there. Now, the sweet spot would be somewhere in here on the middle. You don't want to go really here or a 1 hour and 70%. You want to be in the middle. We're coming back to the sweet spot again, and that's where the math and reality meet. It's not the most exciting strategy, not the most impressive back test, but the one you can actually execute over hundreds of trades, and that's what you're looking for. So, if we notice here, the sweet spot would be somewhere in the middle here. I mean, if you can be very close to the dark spot or the dark cutter, that's going to be the best one, but that's not realistic. But the sweet spot is to be in the middle and very close to the dark color. You could be having a 40% win rate and maybe a 4R. That's going to be good. 50% win rate, 3 R, 4R, that is good. Improvement in trading would be going to the right top, increasing the win rate and the reward risk. But you should be realistic. And I want to tell you that you do not need to win as often as you think. And this is the break even formula. So you can actually apply this to your R. So if you're focusing on five R you apply this and you get definite result. So applying the formula if your target is one reward to risk then you need 50% to break even and above 50% to win but at 4R you only need above 20% to win. So think about that you can be actually wrong most of the time 80% of the time and still not lose money. Variance why traders emotionally fail. Now this is where many traders emotionally fall apart even when they're doing everything right. So variance actually change a lot about you. Now look at these three curves.

[00:07:07]These are based on the same system, same rules and same expectancy but completely different experiences. One gets a smooth ride to the upside, one gets a brutal draw down and one lands somewhere in between. Now imagine that you are the trader in the draw down. You'll be questioning everything and you'll be looking for a new strategy wondering if the edge stopped working. Meanwhile, someone else is trading the exact same system and having different results and winning from the beginning. That's what variance is. And this is one of the hardest truth in trading. You can basically do everything right and still lose. So you get the right entry, the right sol, the right target, and you execute your trading plan and still lose seven trades in a row. Now simply variance means that short-term results are not everything. They don't tell you everything. You can also break every rule and win five trades in a row and that is very dangerous and short-term results outcome prove nothing. Only a large sample tell the truth and that also applies to expectancy. We know that one trade means nothing and also a small sample means nothing. Now a lot of time your [clears throat] mind will start playing games and it's going to trick you. So I'll be having one loss, maybe two losses, three losses. And when you have four losses in a row, you would think that now the next one would have a much higher probability to win. And you'll be saying to yourself and thinking, okay, the next one has to win because now I'm having four losses in a row. So you increase your size, you take more risk, you go more aggressive, and then it's a loser again. What we need to understand from this and that is what gambler's fallacy is that every trade is still independent. Even if you lose five trades before it, the next trade is still a 50/50. It's a coin flip again.

[00:08:58]So I want you to be careful. It does not matter how much losses you have taken in the past. The percentage of win rate for every trade is still 50% and not after four losses it goes to 82% or 91% after five losses. it still stay the same as 50%. Now we get to risk because none of the math we've covered matters if you don't survive long enough for the edge to play out. Position sizing is where discipline becomes visible. So every trade has a different stop-loss size.

[00:09:30]Every risk in dollars must stay the same. Bigger stop- losses means smaller position size and smaller size equal larger position size. So from this that means the dollar risk or the percentage stay the same while everything can change and we need to adjust accordingly. Now why your risk per trade matters so much because if you're risking too much even a normal losing streak becomes dangerous. If you're risking small enough you give your age room to breathe. So what I suggest is go from 0.25% to 2% risk per trade. that is the maximum and a one bad week or bad month will not just destroy everything. So what you can do is and that is one of the most important part of this video is position sizing. So use a position size calculator. You could be using this and that's the link. So you go and have the account currency, the account balance, the risk percentage. So you have $100 in your account. You put 100 or a,000 your risk percentage 0.5% and then your currency pair. So, I'm trading your dollar and then the stop-loss size is 25 pips. You press calculate and that's what you get. So, you're basically risking $5 of your account and then you come here to the standard lot and that's what you're risking. So, you should enter the trade with 0.02 lot size or you could do one simply on trading view.

[00:10:50]So, you have this indicator called lot size calculator. You simply apply this and adjust accordingly and it's going to show you everything. So, you adjust the settings and it's going to give you the lot size here. that is what you're going to be risking. Now, even the worst losing streak is temporary if you have a valid system. So, a losing streak is not a problem, but your position size is. If you can control your risk, a losing streak hurts. If you can notice, it hurts and you have some draw down here, but you can still survive this. But if you're risking too much here, you would lose everything. So you're calculating the risk in order for this draw down if it happens you don't lose all your money but you can still recover and then have a profitable system after that. Now risk of throwin let's look at these numbers here the higher the risk. So this is what you're risking here.5 and 5%. The higher the risk the faster the probability of a win explodes. So here that's the probability of 50% draw down. Notice how it explode to the upside aggressively. So that's the difference between 1% 18 and 65%. This is not an opinion and not psychology but this is basic math and if you understand this you understand survival which is the foundation of everything in trading.

[00:12:03]Now losses and gains are not equal. In this case the math works against you. So a 10% loss need 11% to recover and it's not only 10% but as the loss gets bigger then you need more to recover. So for example, 30% loss need 43% to recover.

[00:12:21]50% loss need 100% to recover. So think about that. The moment you lose half of your account, the market now expects you to double it just to get back to zero.

[00:12:32]That's huge. And that's why protecting your capital matters so much. So after everything we covered, all of the concepts, I know you understand them.

[00:12:40]The question becomes simple. What changes now? What to do? And I want you to be honest with yourself here. Now, math could be one of the problems.

[00:12:48]Psychology could be one of the problems.

[00:12:50]But in this video, we're going to be focusing on psychology. But you can take this question and apply it also to any aspect of trading. So, what is the one thing you know you're doing wrong that if fixed would completely change your trading? You probably already know the answer. And if you sit with it, you would find an answer. And that answer could change your trading forever. This could be judging your system after a few trades. Risking too much to feel something. So, you're actually seeking emotions instead of trading the market.

[00:13:19]Is it confusing good outcomes with good execution? Is it abandoning your edge when variance appears? Or is it chasing certainty in a game of probabilities? It could be one of these or it could be something different. So you have your own answer and you could actually write it in the comments for people to get inspired and instead and that's what you can do regardless of the answer the question. You want to think in probabilities and not outcomes. You want to judge your edge over a large sample.

[00:13:47]That's how you actually allow the math to work in your favor. You risk small enough to survive the variance. You should know that consistency beats perfection and your job is execution and not prediction. So that's it for this video. I hope that you learned something new. If you want to learn my trading strategy, make sure to check out its school. The link is in the description.

[00:14:07]Leave a comment with whatever question you're having. Like and subscribe to the channel. That's it and I will see you next