You Can Win 80% Of The Time… And Still Lose Money

You Can Win 80% Of The Time… And Still Lose Money

Posted On January 21, 2022 2:47 pm

If there was one word I would use to describe the market so far this week, it would be… 


Up and down… up and down… the market hanging on whether we will see a jump in the 10-year Treasury yield that day.

On Tuesday, we saw an increase in the yield, and the market subsequently tanked… as could be expected.

Then, on Thursday, the market finally looked like it had found its footing, and we saw a nice little rally… only for stocks to take a dive in the last few hours of the day.

With the addition of some of the big banks missing earnings — Goldman Sachs, for example, dropped as much as 8% on its bad earnings report — it’s proving a difficult time for stocks to find their footing.

At the time of writing, the Dow was down over 500 points, the S&P 500 has shed over a percent, and the NASDAQ is down over 2% as the losses that kicked off 2022 continue.

It’s difficult to get a clear picture of where the market is headed. Do you go short? Stay long? During these times, many traders may feel like they NEED to be doing something in order to chase down more opportunities and higher gains. 

But the reality is, sometimes, the best action to take is no action at all.

Overactivity does not equal productivity.

Why get burned chasing around the market when it really isn’t giving you anything to be confident about? When our discipline breaks down, so too do our trades.

The two worst things you can do in this volatile market environment are (1) chase trades you’re not fully confident in and (2) ignore your risk/reward profile

Today, I want to focus on that second point and why it’s so crucial to succeeding as a trader.

Let me show you what I mean. Let’s say you make five trades, and you win on four of them. Incredible!

Looking good! And an 80% win rate isn’t too shabby, is it? All right, let’s look at that one loser…

Result? Down $100. 

So much for that win rate…

Considering the risk/reward profile of every trade is crucial! Even if you have an 80% win rate, you can still lose money. Read that again…

Sure, you can make good trades the majority of the time, but if you ignore your risk/reward profile, your losers can tip the scales out of your favor. 

Why do you think that is? Oftentimes, it comes down to poor risk management, or chasing down plays that risk way too much for not enough reward. Lack of discipline, even if only momentarily, can greatly affect your overall trading performance. It’s also why chasing a trade you’re not confident in can be so dangerous.

Even if 80% of your trades are winners, those handful of losers could negate all the gains you saw. You can’t make money if you’re making $0.50 on your good trades and losing $5 on your occasional bad trade. 

This trading methodology works well for our trading theme of keeping it simple. But no matter which rule you choose to trade by, you have to set rules in place and you have to follow them.

You have to exercise discipline

Like most things in life if done without discipline, the performance wanes over time.

These simple lessons are the most important things I can teach my students because they’re often overlooked, especially by inexperienced traders.

I drive home six steps that I think are fundamental to successful trading, and while however simple they may be, I need to stress their effectiveness.

I use and highlight these simple trading steps routinely in my weekly trading service, The Profit Machine, my coaching service where I trade alongside viewers LIVE.

I take pride in being a resource for my students, so I always open the floor to general questions or how I analyze potential trades, all with the goal of teaching lessons such as how to be disciplined, how to manage risk properly, and, yes, when it’s best not to trade.

Join us on an upcoming call, and let’s continue to sharpen your axe with me as the grindstone. You’ll be happy you did…

About author

Christian Tharp, CMT

I am an expert stock market coach having helped over 4000 beginner and advanced traders & investors from around the world take control of their financial futures. I also write stock market related articles for the Adam Mesh Trading Group. My Chartered Market Technician (CMT) designation substantiates me as an expert in areas such as the technical analysis of stock trends, market indicators, cycles, price patterns, Elliot Wave principles, Candlestick charting, analyzing financial trends and behaviors, portfolio strategies, and forecasting future price movements. With my straightforward approach to simple, systematic trading, students learn how to strategically assess buy signals and market entry timing, establishment and management of stop losses, and how to employ a simple and disciplined trading approach that creates profits.