How to read your win rate, profit factor and drawdown
A trading journal is only useful if you know how to read it. These five numbers tell you whether a strategy makes money, how much it makes per trade, and how painful the bad weeks will be.
1. Win rate
Winning trades ÷ all trades. 45 winners out of 100 trades is a 45% win rate.
On its own, win rate means very little. A strategy that wins 80% of the time can still lose money if the losses are much bigger than the wins, and many profitable traders win less than half their trades.
2. Average win, average loss and R
“R” is the amount you risk on a trade. If your stop would lose $10, then 1R = $10, a $20 win is +2R and a full stop-out is −1R. Measuring in R lets you compare trades of different sizes.
Example: a 40% win rate with an average win of +2R and an average loss of −1R makes money, because the winners are twice the size of the losers.
3. Expectancy
(Win rate × average win) − (loss rate × average loss). It is what an average trade is worth.
With the example above: (0.40 × 2R) − (0.60 × 1R) = 0.8R − 0.6R = +0.2R per trade. Over 100 trades at 1% risk, that is roughly +20% before costs.
4. Profit factor
Total money won ÷ total money lost.
- Below 1.0: the strategy loses money.
- 1.0 to 1.3: thin; costs and mistakes can wipe it out.
- 1.5 or more: a strategy worth taking further.
- Above 3 on a small sample: be suspicious. You may have tested too few trades or bent the rules.
5. Maximum drawdown
The biggest fall from a high point in your balance to a later low, in percent. If the account grew to $1,200 and then fell to $960 before recovering, the drawdown was 20%.
Drawdown is the number that decides whether you can actually trade a strategy. Ask yourself honestly: could you keep following the rules through a 20% drop? If not, risk less per trade.
Losing streaks are normal. Even a strategy that wins 50% of the time will often lose 6 or 7 trades in a row over a few hundred trades. Backtesting shows you this before it happens with real money.
How PlayBack Forex shows them
When a PlayBack ends, the Analytics panel shows your balance curve, win rate, profit factor, average win and loss, and maximum drawdown for the whole session, plus a table by pair if you traded several. A Monte Carlo test reshuffles your trades a thousand times to show how bad the drawdown could have been with the same trades in a different order. You can export every trade as CSV for your own journal.
What to write in your journal besides the numbers
- Why you took the trade (which rule).
- A screenshot of the setup.
- Whether you followed your rules, yes or no.
- How you felt: rushed, bored, revenge trading.
Over time the “followed the rules?” column often explains more of your results than the strategy itself.
Try it on real history
Open PlayBack Forex in your browser, pick a pair and a start candle, and trade the chart as it unfolds. Free to start.