The payoff ratio compares the size of your typical winner with the size of your typical loser. It is sometimes called the realized risk-reward, because it is what your planned risk-reward ratio turned into after real exits.
Formula
payoff ratio = average win / average loss
breakeven win rate = 1 / (1 + payoff ratio)
The average loss is written as a positive number.
Example
Average win $180, average loss $150: payoff ratio 1.2. The breakeven win rate is 1 / 2.2 = 45.5%. Win more often than that and the strategy makes money; less often and it loses.
How to read it
Most "high win rate or big winners?" arguments disappear once you look at the pair. A scalper with a 0.6 payoff ratio needs to win more than 62.5% of the time. A swing trader with a 2.5 payoff ratio can be wrong seven times out of ten and still be ahead.
Watch the trend more than the level. If the payoff ratio falls month after month while the win rate holds, you are cutting winners earlier. The MAE and MFE records show whether the market gave you more than you took.
In SetupBook
Analytics shows "Avg win / loss" with the payoff underneath. Breakeven trades are left out of both averages, the same way they are left out of the win rate.