Many people enjoy day trading, with its fast pace, high frequency, quick entry and exit of orders, and the ability to quickly know the results of gains and losses. There is also no risk of holding positions overnight, which makes the trading experience quite thrilling.

At this point, some may wonder, how can one find a trading strategy with a high win rate and a high reward-to-risk ratio that can dominate intraday trading and generate more profits?

So today, seeing this question, I am very pleased because it is impossible to have both a high win rate and a high reward-to-risk ratio. Next, I will discuss the relationship between these two and the issue of how to choose between them, hoping to answer your doubts.

1. Why can't one have both a high success rate and a high reward-to-risk ratio at the same time?

Under the premise of other conditions remaining unchanged, the success rate and reward-to-risk ratio in a trading system are like the two ends of a scale, with a relationship of mutual compensation.

Once you increase the success rate, you will find that the reward-to-risk ratio has decreased; when you increase the reward-to-risk ratio, you find that the success rate is lower. The data for success rate and reward-to-risk ratio can be manually adjusted.

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For these trading opportunities, if you set a 1:1 reward-to-risk ratio, out of 4 opportunities, 3 are successful and 1 is a failure. If you set a 2:1 reward-to-risk ratio, out of 4 opportunities, 2 are successful and 2 are failures. If you set a more aggressive 3:1 reward-to-risk ratio, out of 4 opportunities, 1 is successful and 3 are failures.

From the example above, we can see that the reward-to-risk ratio and the success rate are inversely proportional. It's not just these few trading opportunities; I have done a lot of data statistics when reviewing and calculating the success rate of the trading system. Under the premise of other conditions in the trading system remaining unchanged, the success rate and reward-to-risk ratio have a negative correlation.

Therefore, in practical combat, one cannot have both a high success rate and a high reward-to-risk ratio; we must make a choice in trading.2. High win rate + low risk-reward ratio, low win rate + high risk-reward ratio, how to choose?

From my personal trading style perspective, I would opt for a high win rate combined with a low risk-reward ratio. Why is that?

Firstly, by aiming for a high win rate, your trading mentality will be better. Intraday trading involves a high frequency of transactions and a large number of orders. The trader's mentality is always on edge, with significant emotional fluctuations. Under such conditions, the advantage of a high win rate and low risk-reward ratio becomes apparent because in high win rate trades, there are more correct trades and fewer incorrect ones.

You can imagine that out of 100 trades, if 60-80 of them are correct, and you can secure profits most of the time, wouldn't your emotions be more stable, and wouldn't you have more execution power?

If you choose a high risk-reward ratio, and out of 100 trades, 60-80 of them are wrong, with the possibility of being wrong in 20 trades consecutively, can you withstand the pressure of continuous losses?

Intraday trading is quite unique. From a psychological standpoint, I believe that pursuing a high win rate with a low risk-reward ratio is more suitable. It allows for small profits and frequent gains.

Secondly, from the perspective of market trends and execution.

Intraday market fluctuations are quite large, and the probability of a sustained one-way trend is low. The market often oscillates, making it difficult to hold onto profits with a high risk-reward ratio.

In practical intraday trading, if one pursues a high risk-reward ratio, they often encounter profit drawdowns due to market pullbacks. The characteristics of such market trends are fundamentally not conducive to the execution of high risk-reward ratio trades.You can observe on the candlestick chart that almost all daily candlesticks have upper and lower shadows, and the market tends to have a pullback before closing. Sometimes, the pullback can be quite significant. If intraday trading aims for a high profit-to-loss ratio, these pullbacks can lead to the return of profits from open orders, which is very detrimental to the execution of trades.

Moreover, due to the limited intraday volatility, pursuing a high profit-to-loss ratio may result in the end of the trading day without the market moving into the desired profitable space. At this point, it becomes necessary to hold positions overnight, which disrupts the logic of intraday trading.

Therefore, intraday trading should be quick and decisive.

The characteristic of intraday trading is to be short, flat, and fast, aiming for a high win rate. The profit from each trade may not be substantial, but the frequency of trades is high, and profits accumulate over time. This is a good logic for intraday profitability. In intraday trading, one should no longer pursue a high profit-to-loss ratio, hoping to catch a large space in one go and achieve significant profits. These are two completely contradictory profit-making logics.