The maths most traders get wrong

Imagine two traders. Trader A wins 70% of trades but makes 0.5R per win and loses 1R per loss. Trader B wins 40% but makes 3R per win and loses 1R per loss.

Trader B makes 12× more money with a lower win rate. The difference is the reward-to-risk ratio — how much you make on winners compared to how much you lose on losers.

What R means

R is simply the amount you risk per trade. If you risk $100 per trade, 1R = $100. If you make 3R on a winner, you made $300. If you lose 1R, you lost $100.

The Deriflux agents risk 1% of capital per trade. Over 9 years of backtesting the ETH agent returned +226.9R. With $10,000 allocated and 1% risk ($100 per trade), that is $22,690 profit — from a strategy that loses more than half its trades.

How this works in practice

The key is the exit strategy. Losing trades are cut quickly — the stop is set at 3× ATR from entry, and once hit, the trade closes. No hoping. No averaging down.

Winning trades are held for as long as possible — using a trailing stop that only moves in your favour. The stop tightens as the trade becomes more profitable, locking in gains while letting the winner run.

This asymmetry — small fixed losses, large variable wins — is what makes a 40% win rate mathematically powerful.

Why most retail traders do the opposite

Most retail traders take profits quickly (fear of losing the gain) and hold losses (hope that it comes back). This creates the exact opposite profile — many small wins and occasional catastrophic losses. The win rate looks high. The account shrinks.