Lots of aspiring beginners enter trading with hopes of earning money quick. However, they eventually get crushed by the realization of the difficulties of trading, especially in a volatile market such as cryptocurrency. Whether it is trading with minimal risk such as spot or chasing the high gains of futures, there’s one thing that makes traders tick which is maintaining a good win-rate and being profitable.

As experience grows to having a more intermediate understanding of trading, traders would develop a love for the game. However, this love for the game also brings in the question of which is the best metric to measure a great trader, win-rate or profit & loss (PnL). We asked Michael Geron of Gainers Ground for his expert insights on this take:

If you're a newbie trader and torn with the question of whether win rate or PnL, I would like to answer that question with another question; does it matter?

This question often stems from a cognitive bias common among newbie traders. And because of that, coaches with ill intention can easily exploit this by:

Faking Win Rate: Some may manipulate their win rate by spamming numerous trades in one direction, inflating their numbers artificially.

Flexing High PnL: Others might leave small amounts on both long and short positions and wait until one turns profitable, showcasing the winning side on social media to appear successful.

A high win rate is meaningless if trades are not exited according to a proper risk-to-reward ratio. Similarly, a high PnL is of little value if achieved through undermargin trades that exist solely to hype up others. In trading, prioritizing risk-to-reward should always come first.

As a New Trader, What Should You Focus on First?

Rather than obsessing over win rate or PnL, concentrate on discovering your trading style. Ask yourself:

• Are you a breakout trader?
• Are you a trend follower?
• Are you a reversal trader?
• Are you a pullback trader?
• Are you a forecast trader?

Once you identify your trading style, recognize that these can be further categorized into 2:

Winrate Over PnL (Trend Follower and Pullback Trader): These traders focus on securing profits with a 1.5-3 risk-to-reward ratio.

PnL Over Winrate (Breakout, Reversal, and Forecast Trader): These traders focus on maximizing profits, often aiming for risk-to-reward ratios above 3.

Developing Your Edge

By gathering data on your trading style, emotional attachment to trades, thought process, average winrate, and average PnL, you can start developing your trading edge.

So, which is more important: winrate or PnL? The truth is, a trader with a well-developed edge does not choose between the two. Traders should continuously refine their edge, as they do not choose either, instead choosing both.

Trading is a skill that needs to be honed repetitively with extreme perseverance. It is not only a means to earn large sums of money quickly, but also understanding the psychology of the people and your own self. It is important to draft your own trading plan and strategies that works best with you, and to have the discipline to stick in it. Always be wary of bad actors and “too good to be true” offers, as this may affect how you execute your trading plan and perform in the market.