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A Dirty Secret The "90% Accuracy" Traders Don't Often Share

Updated: Nov 29, 2020

Because of this reason, 90% of traders fail in the stock market trading



I have read many messages in Whatsapp groups and Telegram channels about 90% accuracy in trading.


I am sure many of you read similar messages if you are still thinking about how do I start trading.


But there is a problem:


If you don't look at "Risk-Reward," you aren't going to make money in trading even with 90% accuracy.


In fact, a trader should consider both "Accuracy" and "Risk-Reward" to get a successful career in trading.


Let me explain in detail.


What is Trading Accuracy?


Trading Accuracy or Winning Rate is nothing but a percentage of winning after a series of trades (typically for a minimum of 100 trades).


Accuracy = (Number of winners/Number of losers) X 100%


What is the Risk-Reward Ratio?


Risk-Reward is the ratio of the money you will lose if a trade hit your stop-loss to the profit if a winning trade is closed at a predetermined target level.


Risk-Reward Ratio = Loss/Win or Loss : Win


Assume a trader risks ₹1000 for each trade.

System-1: Accuracy 80% and Risk-Reward is 1:1

In this case, for every winning trade, he gets ₹1000, and for every losing trade, he will lose ₹1000 (as risk-reward is 1:1).

After 10 trades:

Profit = ₹1000 x 8 = ₹8000

Loss = ₹1000x 2 = ₹2000

Hence, the total profit is ₹6000.

System-2: Accuracy 60% and Risk-Reward is 1:1.5

In this case, for every winning trade, he gets ₹1500, and for every losing trade, he will lose ₹1000 (as risk-reward is 1:1.5).

After 10 trades:

Profit = ₹1500 x 6 = ₹9000

Loss = ₹1000x 4 = ₹4000

Hence, the total profit is ₹5000.

System-3: Accuracy 40% and Risk-Reward is 1:2

In this case, for every winning trade, he gets ₹2000, and for every losing trade, he will lose ₹1000 (as risk-reward is 1:2).

After 10 trades:

Profit = ₹2000 x 4 = ₹8000

Loss = ₹1000x 6 = ₹6000

Hence, the total profit is ₹2000.

I hope now you got an idea of how both "Accuracy" and "Risk-Reward" plays a crucial role in trading.

Do you think it is possible to find a Trading System with 90% Accuracy?


It's definitely possible, compensating with "Risk-Reward."


For example, Nifty current market price (CMP) is 11000. I can give a call to buy at 11000, Target 11010, and stop-loss at 10900.


In this way, anyone gets 90% accuracy. But have you noticed the Risk-Reward?


We are risking 100 points to get 10 points profit.


Do you think it's a wise move? I will leave the decision to you!


A successful trader will have only 50-60% accuracy, but their risk-reward will be over 1:2. In this way, they make money in the long run.


Accuracy vs. Risk-Reward – Final Words


The difference between "a good trade" and "good trading" is a lot of money.


Now have you understood the dirty secret of 90% accuracy traders?


Most people read or watch a trading concept, and they start taking trades directly. They ignore other aspects in trading - Money Management, Emotional Control behavior, and Discipline, which play a crucial role in becoming successful in trading.


Trading is a long career. It is better to have complete clarity on both 'accuracy' and 'risk-reward' to stay in this game.


Don't chase 90% accuracy trading systems. You can finalize a trading system by looking at both accuracy and risk-reward ratio.


What are your accuracy rate and risk-reward ratio in your trading?


Do you have any questions or comments? You can drop me a line in the comment section. I am happy to help.


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The current world changed a lot.


With a bank deposit, investing in gold, you can't beat the inflation.


Real Estate demands more money and risky as well.


So, what's the remaining option?


The answer is, "STOCK MARKET!"


Download the free eBook "What Wikipedia Can't Tell You About Stock Market" to know more.

© 2020 by Indrazith Shantharaj.