Here is a message we get in some form almost every week: "I win more trades than I lose. My account is still smaller than last year. What am I doing wrong?"
Usually, nothing mysterious. The arithmetic is simply not on your side, and win rate is hiding it from you.
Win rate tells you how often you are right. It says absolutely nothing about how much you make when you are right, or how much you give back when you are wrong.
Risk-reward ratio (R:R) is the other half: your average win divided by your average loss. On its own it is equally useless. A trader with 5:1 R:R who wins once in twenty tries is broke too.
Only the two together mean anything. The number that combines them is called expectancy:
Expectancy = (Win rate × Average win) − (Loss rate × Average loss)
SENSEX weekly options: BSE, Thursday expiry, lot size 20, strikes in steps of 100. One premium point is ₹20 per lot. Keep that conversion in your head — it is the only maths you need here.
Say you buy weekly options and you are genuinely good at picking direction. Over 100 trades you win 66 and lose 34. Very respectable.
But you take profit fast, because a green number on the screen is uncomfortable to hold. Average win: +8 points. And when a trade goes against you, you wait for it to "come back". Average loss: −22 points.
At ₹20 a point, that is −₹4,400 per lot. Trade five lots and you are down ₹22,000 — while being right two times out of three. And that is before brokerage, STT, exchange charges, and the bid-ask spread you cross on the way in and again on the way out.
There is a clean break-even formula. To merely stay flat, your average win divided by your average loss must be greater than:
(1 − win rate) ÷ win rate
| Your win rate | Minimum avg win : avg loss just to break even |
|---|---|
| 30% | 2.33 : 1 |
| 40% | 1.50 : 1 |
| 50% | 1.00 : 1 |
| 60% | 0.67 : 1 |
| 66% | 0.52 : 1 |
| 75% | 0.33 : 1 |
Read the 66% row again. At a two-thirds win rate you only need your average winner to be about half the size of your average loser to break even. Our example trader had 8 against 22 — a ratio of 0.36. Below the line. That single gap is the entire loss.
Once you accept the formula, the fix stops being about finding better tips.
Lever one — make the average loss smaller. Keep everything else identical but cut the average loss from 22 points to 10, and the same 66 wins now produce 528 points against 340 lost: net +188 points. Nothing about your entries changed. A stop-loss you actually honour did all of it.
Lever two — make the average win bigger. Keep the 22-point losses but let winners reach 15 points instead of 8, and you get 990 against 748: net +242 points. This is what a scale-out plus a trailing exit is for — book a piece to make holding bearable, let the rest run.
On SENSEX weeklies the loss side gets an extra push that index traders underestimate: theta. As Thursday approaches, an option that simply sits still is losing value every hour. "Waiting for it to come back" is not a neutral act on Wednesday afternoon — the clock is charging you rent.
That is also why a fixed, points-based stop behaves more predictably than a mental one. Twenty-two points is twenty-two points whether you hold one lot or ten; ₹20 per point per lot does not negotiate.
Open your last fifty trades. Write down four numbers: how many you won, how many you lost, your average winning points, your average losing points. Put them into the expectancy formula. Most traders discover their win rate was never the problem, and that one or two outsized losses ate an entire quarter of small, honest wins.
Win rate is the number you post in the group. Expectancy is the number that pays your EMI. They are not the same thing, and only one of them is on your side.