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Average win / Average loss

Average win is the mean result of your winning trades only, average loss the mean of your losers only. Taken together, these two figures describe the shape of your trading far better than P&L: they say whether you live off a few big hits or a steady accumulation.

The formula

Average result of winning / losing trades.

How to read it

The typical size of a winner and a loser, in currency.

Look at average loss first. If it sits close to your planned risk, your stops hold. If it clearly exceeds it, you widen them mid-trade or skip them, and that is the most expensive flaw in the job. Average win is read against your average MFE: the gap is what you leave on the table.

The classic mistake

Reading both figures in currency on an account whose position size varies. An average win that rises because you doubled your size is not a method improvement. Tie them to your risk, that is switch to R: it is the only scale that stays comparable month to month.

To go deeper on this : read the full guide. Every term is gathered in the glossary.