We can abstract the core idea of the trading system as follows:
Expected profit per trade = Win rate × Profit per win – Loss rate × Loss per loss, simplified to: average profit per trade minus average loss per trade.
For example, considering three types of roles:
Retail Investor: Win rate is 45%, expected profit = 0.45 × 1.5 – 0.55 × 1 = +0.125
Regular Trader: Win rate is 50%, expected profit = 0.50 × 1.5 – 0.50 × 1 = +0.25
Professional Trader: Win rate is 55%, expected profit = 0.55 × 1.5 – 0.45 × 1 = +0.375
As we can see, from retail investors to regular traders, a 5% increase in win rate nearly doubles the profit; while a 10% increase in win rate results in a 200% increase in expected profit. This gap is much larger than we imagined.