Core Insight: The essence of trading profit is a probability game; a 5% win rate difference can create a 3-fold return difference.
1. Simplify the profit formula
Average profit per trade = (win rate × profit margin) - (loss rate × loss margin)
Example:
- Retail Investor: 45% win rate × 1.5 units profit - 55% loss rate × 1 unit loss = +0.125 units
- Professional Trader: 55% win rate × 1.5 units profit - 45% loss rate × 1 unit loss = +0.375 units
2. Key Difference Amplifier
• Win rate increase of 5% → Returns double (0.125→0.25)
• Win rate increase of 10% → Returns increase by 200% (0.125→0.375)
• Risk-reward ratio optimization (e.g., 1.5:1) is more important than simply increasing win rate
3. Variables in reality
• Trading costs: 0.1% commission can offset about 10% of theoretical returns
• Execution bias: Emotional trading may halve the model's returns
• Market structure: The impact of trending markets/volatile markets on strategy effectiveness can reach 300%
4. Professional Trader's Mindset
• Prioritize controlling losses (stop loss < 2/3 of profits)
• Magnify small advantages through position management (1%-3% capital exposure)
• Validate strategy with statistics (at least 100 trading samples)
5. Long-term compounding effect
Assuming 20 trades per month:
• Retail investors annualized ≈ 30% (0.125×20×12)
• Professional traders annualized ≈ 90% (0.375×20×12)
After 5 years, the gap reaches 32 times (1.3^5≈3.7 vs 1.9^5≈24.4)
Note: This model does not consider extreme market conditions; actual trading should be combined with dynamic risk control. Core Insight: In a repeatable system, the accumulation of sustained small advantages is far more important than single large profits. #Trading#