Forex Win to Loss Ratio

When trading in the forex market, or as a matter of fact in any financial market, win and loss are the clear indicators of profit and loss. In simple mathematical expression the more you win the more you gain or profit. A win to loss ratio of at least 2:1 or 3:1 can earn the profit and limit your losses although this may prove to be oversimplified.

There are many factors that make the forex trading practice unique for every trader. Practical realities of the forex market, the individual trader's trading style, trading strategies, and the average profitability per trade factor, all influence the ultimate forex win to loss ratio.

The forex win to loss ratio is useful to measure your profitability. This tells how many times you get a winning trade as opposed to a losing trade. For example, if you had ten trades, four of those trades were winners, and six were losers, your forex win to loss ratio is four to six.

The most simple and practical approach to maintain a profitable win to loss ratio will be to make sure that your profit is more than your loss per absolute trade. A forex trading system or strategy can actually give you the edge in the forex market.

To ensure a high win to loss ratio, you must have a structured system at place. A good trading system is one that has an edge over the market and makes good consistent profits with high win to loss ratio.

A profitable system may have a win-loss ratio of say 0.8 (80 to 50% forex win to loss ratio, but may still be profitable if the profit loss ratio is as high as say 2.5 or 3 to 1.

A forex system with a high win to loss ratio is easier to trade. Some forex systems may have both a high win to loss ratio as well as a high profit to loss ratio, which is obviously a bonus. In this case, your winning trades are much larger than the losing trades.

Back testing your forex system to find out the win to loss ratio is very important. Without a back testing plan you can never know that the system may have received up to 10 losses in a row, but was still profitable.

To learn more about trading currencies online visit Forex Win to Loss Ratio