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Trading & Technical Analysis

Expectancy

Also called: trading expectancy, expected value per trade, win rate

Expectancy is the average profit or loss per trade, combining win rate with average win and average loss. It's the only number that determines whether a strategy makes money, and it explains why a 30% win rate can be highly profitable while a 70% win rate can be ruinous. Positive expectancy plus sane position sizing is the whole of trading survival.

Formula

Expectancy = (Win% × Avg win) − (Loss% × Avg loss)

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