Expectancy
Expectancy — The average profit (or loss) you can expect per trade, calculated as (win% × avg-win) - (loss% × avg-loss).
- Quick definition: The average profit (or loss) you can expect per trade, calculated as (win% × avg-win) - (loss% × avg-loss).
- Category: Strategy
Full Definition
Expectancy = (Win Rate × Average Win) - (Loss Rate × Average Loss). A strategy with 50% win rate, $200 average win, and $100 average loss has expectancy = (0.5 × $200) - (0.5 × $100) = $50 per trade. Positive expectancy = profitable strategy. Backtest at minimum 100 trades to compute expectancy with confidence.
Related Terms
Win Rate · Risk-Reward Ratio · Sharpe Ratio
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