The Investor Diary Entry #88: October 12, 2025
In this entry of my trading diary, I am documenting my deep dive into a fundamental trading metric: the win loss ratio. This is not a lesson but a record of my process to understand what this ratio means for my own Forex trading plan and how I am addressing its challenges. My goal is to explore the concept thoroughly to inform my next steps in developing a systematic approach.
Understanding and Calculating the Win Loss Ratio
I am defining the win loss ratio as the relationship between my winning and losing trades. For example, if I have 12 winning trades and 18 losing trades out of 30 total, the ratio is 2:3. This means for every three losses, I achieve two wins. I am learning that calculating this ratio involves identifying the two numbers and simplifying them using their greatest common denominator. While I have set up a formula in my spreadsheet to automate this, the raw calculation is only the starting point for my analysis.
The Relationship Between Ratio and Risk Management
A central part of my testing is understanding that a good win loss ratio is not a standalone target. I am learning that its value is entirely dependent on my risk management rules. My risk management plan is solid; I risk a percentage range per trade, typically around 0.5% but the range allows me a risk per trade percentage reaching 1%, which has protected my capital despite a high number of losses. For instance, even with a negative win loss ratio of 6:17, my account is only down about 2.5%. This demonstrates that effective risk management controls the damage from a poor ratio but does not, by itself, create a profitable one.
Analyzing My Personal Win Loss Ratio
In our entry titled “My Journey On How To Become A Successful Forex Trader: The Two Pillars,” we discussed that this journey is based on two pillars: Risk Management and The Trading Plan.
Analyzing my current win loss ratio and the sources of its weakness, I realized that with a Win Loss ratio of 6 wins to 17 losses, my account balance should have been destroyed, but with my strict risk management in place, the account is only around %2.5 down. This result clearly indicates that the issue lies not with how I manage risk, but with the trading plan itself.
The logic that generates my trade entries within the Smart Money Concepts framework is the variable I must improve. The problem is not the size of my losses, but the fact that I am having too many of them relative to wins, even with a favorable risk-to-reward on individual trades.
My Plan to Improve My Trading Plan
I am considering two general paths to improve my win loss ratio. The first would be to completely change my trading plan, perhaps moving from Smart Money Concepts to a more classical approach. However, I am not a fan of jumping from one strategy to the next. Normally, jumping between strategies without fully mastering one is extremely dangerous and will lead to many years of a goose chase.
My chosen path is to refine my existing plan. I believe the issue may be in my proficiency and the specific rules of implementation, not in the core methodology. I am focusing on improvements within my current system.
Advanced Strategies I Am Testing
My improvement plan involves several advanced optional adjustments. Firstly, I can move away from using pending orders and instead use market orders, waiting for the price to react at my identified Points of Interest. This may cause me to miss some trades, but I prefer that to taking premature entries.
Secondly, I am experimenting with integrating a volume-based indicator for additional confirmation, though I am cautious about over-relying on external tools. Lastly, and most significantly, I am implementing a new rule based on my observation of my floating profit and loss. I will close all trades that collectively reach a 3-5% floating profit during the week, and I will close any positively floating trades on Friday afternoons to avoid weekend risk.
The Next Phase of My Testing
The changes I am going to try first are: keep testing the integration of volume, and implement the new rules around closing floating profits. I believe that this might directly negatively impact my risk-to-reward, but I am hoping that improving the win loss ratio will overcompensate. My next step is to diligently track the results of these adjustments. I will be monitoring my trades to see if this more active management approach leads to an improvement in my ratio and overall profitability. This continuous cycle of testing, observing, and adjusting is the core of my journey as I work to build a robust and personal Forex trading plan.
The Investor
Sunday 12 October 2025
About The Author
I started to look into individual stocks in January 2022. I created this diary initially for myself to track my investing progress, and second, as a place where I can share my ideas publicly, not only on stock investment, but on any venture that I start learning, such as Forex Trading, Blogging, or any other future venture that I might think of trying out.
By repeating things I learn to myself and trying to explain it to others, I help myself better understand what I am learning. Additionally, hoping that others will share their ideas and learn from each other, and lastly as an online business where some links that I share are affiliate links, and if anybody bought anything by clicking tihose links, I will get a commission based on that successful sale, which of course will not affect the price that you are buying the product or service at.
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This blog is also part of my blogging learning project. I’m using a platform to learn this part. If you are interested in it, it is called Wealthy Affiliate.
Furthermore, this site is in no way or form giving any financial or investing advice, nor is it encouraging or discouraging people to buy or sell any financial instrument. This is a personal diary in which I track my own progress and share it for informational, educational, and entertainment purposes.