What is expectancy?Expectancy
What you make per trade on average over the long run: win rate × average win − loss rate × average loss; only worth trading if positive.
Learn “expectancy” in an animated lesson
- Risk Management & Trading PsychologyExpectancy: Win Rate Isn't Everything
A 40% win rate can make money, and an 80% win rate can still blow up. What decides the outcome is win rate combined with payoff ratio.
- Risk Management & Trading PsychologyTrading Journals and Reviews
Record the reason, emotions and result of every trade. After a few dozen trades, the data will tell you which setups really make money and when you're most likely to make mistakes.
- Indicators in Practice & BacktestingExit Rules: Trading Win Rate Against Payoff
Same entry, different exits (fixed take-profit, trailing stop, time stop): how do win rate, payoff ratio and expectancy change?
- Indicators in Practice & BacktestingSample Size: Is 7 Wins out of 8 Reliable?
With too few trades, win rate and returns are easily swayed by luck. Use a confidence interval to ask: roughly where is the true win rate?
Related terms
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Go to “Expectancy: Win Rate Isn't Everything”