Last updated: 15 October 2026 · By Spencer Li, CFTe

A high win rate does not make a strategy profitable. Whether you make money depends on 2 numbers together: how often you win, and how big your average win is compared with your average loss. That second number is the reward-to-risk ratio.

The 2 are tied by one simple line. The win rate you need to break even is 1 divided by (1 + your reward-to-risk ratio). If your average win is twice your average loss, you need to win a little over 33% of the time. If your average win is only half your average loss, you need to win more than 66.7% of the time.

That is how a 70% win rate can still lose money. If the average win is smaller than about 0.43 times the average loss, 70% sits below the line. And a 30% win rate can make money, as long as the winners are big enough.

Why can a 70% win rate still lose money?

Because the wins are too small to pay for the losses. A trader on r/Daytrading summed up the problem in January 2026: a “70% Win rate” and “still not profitable.”

Here is how that happens, with one hypothetical set of round numbers. You make 100 trades and win 70 of them. Each win makes 0.4R, where R is the amount you risk on a trade. Each loss costs the full 1R.

• 70 wins × 0.4R = 28R
• 30 losses × 1R = 30R
• Net after 100 trades: −2R

Most days end green. Most weeks feel like progress. And after 100 trades the account is a little smaller than where it started. The pattern is common in strategies that grab small profits fast and let losing trades run all the way to the stop, or past it.

What win rate do you need at each reward-to-risk ratio?

This is the breakeven line, worked out for the ratios traders use most:

The formula behind it: breakeven win rate = 1 ÷ (1 + reward-to-risk). At 2 to 1, that is 1 ÷ 3, or 33.3%.

Read each row as the floor, since a real strategy needs to sit comfortably above it once commissions, spreads and slippage have come off the top of every single trade you take over a year. A strategy that only just clears its breakeven line on paper usually falls below it in a live account.

Which matters more, win rate or reward-to-risk?

Neither one, on its own. What matters is the combination, and the number that captures it is expectancy: the average amount you make or lose per trade, measured in R.

Expectancy = (win rate × average win) − (loss rate × average loss)

Here are 4 hypothetical strategies, each risking 1R per trade:

Strategy A wins most often and is the only one that loses money. Strategy C loses 7 trades in every 10 and still comes out ahead. The full method, including how to work out your own numbers, is in the trading expectancy formula.

If you want a daily routine that checks the ratio before every trade, the free 15-Minute Swing Trader’s Checklist is at the end of this post.

Is a higher reward-to-risk ratio always better?

Here is the strongest case against chasing big ratios, and it deserves a fair hearing. In December 2025 a trader on r/Daytrading said that holding out for targets 3 times the risk “is psychological torture”. He described taking 8 losses in a row while waiting for one big winner, and how it wore down his confidence. He switched to a high win rate style and felt far better.

He has a point, and the maths backs him up. Low win rates bring long losing streaks, and they bring them often. Here is the chance of at least one run of 8 straight losses somewhere in 100 trades, assuming each trade is independent:

At a 33% win rate, a streak like his is more likely than not. If that streak makes you skip the next setup, or abandon the plan halfway through a rough month, the reward-to-risk ratio that looked so good on paper never actually reaches your trading account.

So the right balance is the one you can actually follow. Where I differ from him is on the fix. Choose your trade-off on purpose, measure it, and size each trade small enough that a long streak is survivable. At 1% risk per trade, 8 straight losses cost about 7.7% of the account. That hurts. It does not end anything.

Personally, I sit in the middle. My closed trades win roughly half the time, and the average win has been about 3 times the average loss. The record is public: every trade since April 2024, dated, losses left in.

How do you change your reward-to-risk ratio?

Through where your stop and target sit, and through what you do once the trade is open.

• The stop. A stop placed inside the normal noise gets hit often, which drags the win rate down. How to place it beyond the level that matters is in where to put your stop loss and take profit.
• The target. Set it near the closest level where the move is likely to stall, and pass on trades where that level sits less than about 2R away.
• The loss you let run. Moving the stop further away “to give it room” turns a 1R loss into a 2R loss. It is the fastest way to wreck a good ratio, and the psychology of the stoploss explains why it is so tempting.

Do note that the 2 numbers pull against each other. A wider target usually lowers the win rate, and a tighter one raises it. You do not get to set both. The market sets the trade-off, and you choose where on it to stand.

You only know your own 2 numbers if you write every trade down, which is the case for keeping a trading journal. For the full map of these ideas, read the practical guide to money and risk management.

Strategy A would have felt like the best of the 4 for most of the year, right up to the evening someone added up the R.

FAQ

What is a good win rate for trading?

There is no good win rate on its own. A 40% win rate is strong with winners twice the size of the losers, while 70% loses money if the winners are under 0.43 times the losers.

What is a good risk-reward ratio?

Many swing traders aim for at least 2 to 1. That ratio needs a win rate above 33.3% to break even, before costs.

How do you calculate the breakeven win rate?

Divide 1 by 1 plus your reward-to-risk ratio. At 1.5 to 1, that is 1 ÷ 2.5, which is 40%.

Can you be profitable with a 30% win rate?

Yes, if the average win is comfortably more than about 2.33 times the average loss. Expect long losing streaks along the way.

Is a 1 to 1 risk-reward ratio good?

It can work, but it needs a win rate clearly above 50% after costs. That leaves very little room for error.

Go deeper

The free 15-Minute Swing Trader’s Checklist has the daily routine, the questions to ask before every trade, and the five rules that keep you in the game.

About the author. Spencer Li is The 15-Minute Trader and the founder of Synapse Trading. He is a Certified Financial Technician (CFTe) with 15+ years of trading, run from 70+ countries. He holds a B.Acc and B.BM from SMU. Every trade he takes is public, dated, losses left in. He teaches low-risk swing trading in 15 minutes a day, one system for any market.

Educational content only, not personalised financial advice. Trading carries risk, including loss of capital. Past performance is not indicative of future results. Synapse Trading is not licensed or regulated by MAS.

What each one guarantees, what it gives up, and which to use when a stock gaps through your stop

Published: 16 October 2026 · Last updated: 13 August 2026 · By Spencer Li, CFTe

Most beginners pick an order type the way they pick a seat on the bus, which is whichever one is free. That works until the day the price runs straight through a stop-loss and the order does something they did not expect.

There are four core order types. A market order buys or sells right away at the best price available, so it promises a fill and does not promise the price. A limit order only trades at your price or better, so it promises the price and does not promise a fill. A stop order waits until the price reaches a trigger, then turns into a market order, which is how most stop-losses work. A stop-limit order waits for the same trigger, then turns into a limit order, so you control the price and risk not getting out at all. Every order type is a choice between those two certainties, the fill or the price, and you can rarely have both.

Below, each one is worked through, along with the one situation where the choice really matters: a gap.

What does each order type guarantee?

Here they are side by side.

I call this Fill or Price, because that is the only real question each order answers. Once you see it, the four types stop being four things to memorise and become one decision.

When should you use a market order?

When getting the trade done matters more than the last few cents. The US Securities and Exchange Commission puts it simply: a market order “guarantees that the order will be executed, but does not guarantee the execution price.”

The trap is the price you see on the screen. As the SEC notes, “the last-traded price is not necessarily the price at which a market order will be executed.” You buy at the seller’s asking price and sell at the buyer’s bid price, and the gap between the two is the spread. On a busy large-cap stock that gap is tiny. On a thinly traded small stock, or in the first minutes after the open, it can be wide, and a market order will cross it without asking you.

When should you use a limit order?

When the price matters more than whether you trade at all. In the SEC’s words, “a buy limit order can only be executed at the limit price or lower, and a sell limit order can only be executed at the limit price or higher.”

So the cost of a limit order is the trade you miss. Say you want to buy a stock at 40 and set your limit there. It drops to 40.05, turns and runs to 50 without you. You saved five cents a share and missed the whole move. That is a fine outcome when the plan only works at 40, and an annoying one when it would have worked at 41 too.

Limit orders are also the natural way to take profit at a planned target, because a target is a price you have already decided you are happy with.

How does a stop order work?

A stop order sits quietly until the price reaches your trigger, called the stop price. Then it wakes up. According to the SEC, “When the stop price is reached, a stop order becomes a market order.”

A sell stop sits below the current price and is how most people place a stop-loss on a long position. A buy stop sits above the current price. Short sellers use it as their stop-loss, and breakout traders use it to enter only if the price pushes through a level.

Because it becomes a market order, it inherits the market order’s weakness. The SEC’s bulletin on stop orders warns that one “may be triggered by a short-term, intraday price move that results in an execution price for the stop order that is substantially worse than the stock’s closing price for the day.” That is the experience behind a Reddit thread titled “Stopped out at the exact high/low repeatedly.” Brokers also differ on what counts as reaching the trigger, since “some brokerage firms use only last-sale prices to trigger a stop order, while others use quotation prices.”

A stop that follows the price up as a trade moves your way is a trailing stop, which has its own post: Trailing Stops: How They Work and When to Use Them.

Our free 15-Minute Swing Trader’s Checklist puts the stop, the target and the size on paper before any order goes in. Get the free checklist →

Stop-limit vs stop-loss: which one protects you in a gap?

A stop-limit order has two prices, the trigger and the limit. The SEC’s example is a sell stop-limit with a stop price of $3.00 and a limit of $2.50. It “would become an active limit order if market prices reach $3.00, however the order can only be executed at a price of $2.50 or better.”

Now picture the morning it matters. Here is a hypothetical, in round numbers. You own a stock at 50 and want out if it falls to 47. The company reports bad news overnight, and the stock opens at 42.

• With a stop order at 47, the trigger fires at the open and you are sold at around 42. You lost more than you planned, and you are out.
• With a stop-limit at 47, limit 46, the trigger fires, but nobody will pay 46. The order sits there unfilled. You are still holding a stock at 42, and if it slides to 38 by the close, the loss keeps growing while your “protection” waits for a price that has gone.

Neither outcome is pleasant. But only one of them has an end.

That is why a simple default helps: on the way in, insist on the price, and on the way out, insist on the fill. A missed entry costs you an opportunity. A missed exit can cost you the account. So stop-limit orders tend to suit entries, where a bad price is worse than no trade, and plain stop orders tend to suit protective exits. The exception is a very thin market, where a plain stop can fill at a silly price, and that is a reason to trade smaller there rather than to remove the stop.

How much you lose when a stop fills badly also depends on how big the position was to begin with, which is what the 2% money management rule is there to control.

How long does an order stay open?

Each order also carries a time instruction. Most are day orders. The SEC explains that day orders, “if not executed, generally cancel at the end of regular trading hours of the trading day that they are entered.” A good-til-canceled order “lasts until it is executed in full or it is canceled,” although the longest a broker will hold one varies by firm.

This matters more than people think if you trade US stocks from Singapore. The US market opens at 9.30 pm Singapore time in the American summer, and 10.30 pm in their winter. A stop-loss placed as a day order in the afternoon will protect you for one session and then quietly disappear. A good-til-canceled stop keeps protecting you while you sleep.

There are a few rarer instructions too. An immediate-or-cancel order fills what it can at once and cancels the rest. A fill-or-kill order must fill in full at once or not at all. And a bracket order (sometimes called one-cancels-the-other) pairs a stop-loss with a profit target, so that when one fills the other is cancelled. Our video on how to place orders and enter trades shows what these look like on an order ticket.

So, look at the open orders in your account right now. Which of them would still be there after the next close, and which of them would actually get you out if the stock opened 10% lower tomorrow?

FAQ

What are the four main order types in trading?

Market, limit, stop and stop-limit. A market order fills now at the best available price, and a limit order fills only at your price or better. A stop order becomes a market order at a trigger price, and a stop-limit order becomes a limit order at that trigger.

What is the difference between a stop-loss and a stop-limit order?

A stop-loss order becomes a market order when the trigger is hit, so it gets you out at whatever price is available. A stop-limit order becomes a limit order, so it only fills at your limit or better and may not fill at all if the price gaps past it.

Is a stop-limit order safer than a stop order?

For a protective exit, usually not. A stop-limit controls the price but can leave you holding a falling position after a gap, while a plain stop gets you out at a worse price.

Why did my market order fill at a different price than the screen showed?

Because the screen shows the last trade, and a market order fills against the best available bid or ask at that moment. In a fast or thin market the two can differ a lot.

What is a good-til-canceled order?

It is an order that stays open until it fills in full or you cancel it, rather than expiring at the day’s close. Brokers set their own limit on how long one can stay open, so check yours.

Go deeper

This post sits under our guide to money and risk management. If you would like the routine that decides your stop, target and size before any order goes in, the free 15-Minute Swing Trader’s Checklist is the place to start.

About the author. Spencer Li is The 15-Minute Trader and the founder of Synapse Trading. He is a Certified Financial Technician (CFTe) with 15+ years of trading, run from 70+ countries. He holds a B.Acc and B.BM from SMU. Every trade he takes is public, dated, losses left in. He teaches low-risk swing trading in 15 minutes a day, one system for any market.

Educational content only, not personalised financial advice. Trading carries risk, including loss of capital. Past performance is not indicative of future results. Synapse Trading is not licensed or regulated by MAS.