X-axis - Win Ratio
Y-aixs - Reward for $100 risk
Calc - % return in a year with these selections.
(1) Selecting a $5000 account, with 30 trades a year
(2) If I receive a reward of $400 (y-axis) for every $100 risked and my win ratio is 40% (X-axis)
Then my annual return would be 60%
Otherwise calculated as (30 trades * $400 * 40%) - (30 trades * $100 * 60%) = 4800-1800
= 3000 / 5000 (Account Size) = 60%
The slight brighter green is the goldilocks zone in that it is the most realistic on the market.
Getting a 90% win ratio and having returns of 1:9 is fantastic but not likely to happen.
Created by RH