Recently, a student asked me a question: why do I emphasize the importance of the profit-loss ratio so much? Actually, it's very simple, because it determines whether you can achieve consistent profits.

Let's clarify the concept first. The profit-loss ratio is the ratio of your profit to your loss each time. Suppose you have $100 in your wallet, and you only risk 10% each trade. When you make 10 trades, if your win rate is only 10% and your profit-loss ratio is 1:1, that means you win once and lose nine times, ending up losing $80. But if you can improve your profit-loss ratio to 1:2, the situation changes completely.

I did some calculations to show you. When the win rate is 50% and the profit-loss ratio is 1:1, you're basically breaking even. But when the win rate remains 50% and the profit-loss ratio increases to 1:1.5, you start to make a profit. If you can achieve a 1:2 profit-loss ratio, then a 40% win rate is enough to be consistently profitable. Even more impressive, with a 1:5 profit-loss ratio, you only need a 20% win rate, which is much easier than guessing randomly.

So what is the core logic? Before entering a trade, think about how much you're willing to lose, for example, $10, then see if the market can give you a chance to make $15 or $20. If yes, then enter; if not, then skip. That’s a successful trade.

I once saw a student with a 71% win rate and a 1:1.5 profit-loss ratio, but after ten days or so, they still broke even—no profit, no loss. Many beginners fall into this trap. They say, "I’ve had six consecutive wins recently, a 100% win rate," but that’s not their true level. Doing only one trade per week naturally results in a high win rate, but it also indicates you’re trading too infrequently.

Conversely, some people think their win rate is very low, making dozens or even hundreds of trades a day, just entering whenever they see a signal. That’s also problematic. Either you trade too much or too little, and it’s hard to see your true ability.

My advice is this: first, figure out what you’re good at—whether it’s range trading or trend trading, rebound trades or others. Then, record every trade and analyze your long-term true win rate and profit-loss ratio. Once you know these two numbers, you’ll understand why you keep losing money and how to improve.

Finally, a reminder: don’t take trades you’re not confident in. When you feel like there are two voices arguing in your head, it means you don’t understand the market. At this point, giving up on that trade is the smartest choice. The concept of profit-loss ratio may seem simple, but if you master it well, it can help you turn losses into steady profits.