// Methodology · Whitepaper
Break-even rate beats "win rate": expectancy in pattern trading
The marketing number versus the honest one — and how to turn a pattern's real completion rate into position size and edge.
Abstract
Signal vendors advertise glossy "win rates" that rarely define what a win is. The academically grounded metric is the break-even failure rate — the share of pattern occurrences that fail to move even a token amount before reversing. This paper defines the metric, connects it to expectancy, and argues that surfacing a pattern's measured completion rate on every detection is a prerequisite for disciplined sizing.
01What a win rate hides
A "92% win rate" is meaningless without a definition of win, a sample size, and an accounting of survivorship. Was a 0.2% move a win? Were losing occurrences excluded? Marketing numbers optimise for the screenshot, not for the trader's expectancy.
02The break-even failure rate
Thomas Bulkowski's widely cited work measures a break-even failure rate: the percentage of pattern occurrences that fail to move even ~5% in the expected direction before reversing. It is deliberately unglamorous, which is why it is useful. A pattern with a 15% break-even failure rate is genuinely dependable; one at 45% needs confirmation and smaller size.
03From rate to expectancy
Edge is not win rate alone. Expectancy = (win% × average win) − (loss% × average loss). A 40%-completion pattern with a 3R average winner is strongly profitable; a 70%-completion pattern with a 1:3 reward loses money. The completion rate is only one input into the equation that actually matters.
04How TradrQuant applies it
Where a pattern references published performance literature, we surface that measured completion rate alongside the detection rather than a marketing win rate, so you can size smaller on marginal setups and lean into high-rate ones. We do not present simulated outcomes as a verified track record.
// Key findings
- 01"Win rate" without a defined win, sample and accounting is a marketing artefact.
- 02Break-even failure rate is the honest, literature-grounded reliability metric.
- 03Expectancy — not completion rate alone — determines profitability.
- 04Showing the real rate on each detection enables odds-based position sizing.
Frequently asked
What is a good break-even rate?
The strongest classical patterns show break-even failure rates around 13–20% in Bulkowski's data. But a lower-rate pattern can still be profitable if its average winner is large — expectancy decides.
Does TradrQuant publish its own win rate?
We surface literature-grounded completion rates on detections and keep any track record clearly labelled. We do not present simulated results as verified performance.
How does the rate affect my sizing?
Size to the odds: smaller on marginal, lower-rate setups; larger on high-rate, high-quality ones. The rate is an input to expectancy, which drives size.
// References & further reading
- Bulkowski, T. — Encyclopedia of Chart Patterns (break-even failure rates, 38,500+ trades).
- Thorp, E. — The Kelly Criterion in blackjack, sports betting and the stock market (sizing to edge).
- Tharp, V. — Definitive Guide to Position Sizing (expectancy & R-multiples).
See the engine in action. Meet the Scanner.
Explore the Scanner// Related papers
// Educational & methodology content only — not financial advice. Figures are conceptual and illustrative and do not represent verified trading results. Past performance does not guarantee future results.