What is expectancy in trading systems?

@godswillfx - 4 months ago - Forex Education

Expectancy is the average profit (or loss) you can expect per trade from a trading system over the long run.

Simple Formula:

Expectancy = (Win Rate × Average Win) – (Loss Rate × Average Loss)

- Win Rate: % of trades that win (e.g., 60%).

- Loss Rate: % of trades that lose (e.g., 40%).

- Average Win: Average profit on winning trades.

- Average Loss: Average loss on losing trades (use positive number).

@godswillfx - 4 months ago

Example:

- Win rate = 55%

- Average win = $200

- Average loss = $100

- Loss rate = 45%

Expectancy = (0.55 × 200) – (0.45 × 100) = 110 – 45 = +$65 per trade

This means, on average, you make $65 every time you take a trade even though you lose 45% of the time.

@godswillfx - 4 months ago

Key Points for Forex Traders:

- Positive expectancy (> 0) = Profitable system over time.

- Negative expectancy (< 0) = Losing system, no matter how good it "feels."

- A high win rate with small wins and big losses can still give negative expectancy.

- A lower win rate with big wins and small losses can give strong positive expectancy.

@melody_nk - 4 months ago

Quoted - godswillfx

Key Points for Forex Traders:

- Positive expectancy (> 0) = Profitable system over time.

- Negative expectancy (< 0) = Losing system, no matter how good it "feels."

- A high win rate with small wins and big losses can still give negative expectancy.

- A lower win rate with big wins and small losses can give strong positive expectancy.

Nice one

@hosea_makelele - 4 months ago

Quoted - godswillfx

Key Points for Forex Traders:

- Positive expectancy (> 0) = Profitable system over time.

- Negative expectancy (< 0) = Losing system, no matter how good it "feels."

- A high win rate with small wins and big losses can still give negative expectancy.

- A lower win rate with big wins and small losses can give strong positive expectancy.

Keep losses small and winners big

@godswillfx - 4 months ago

Quoted - hosea_makelele

Keep losses small and winners big

That's just the secret

@godswillfx - 4 months ago

Quoted - melody_nk

Nice one

Yeah bro

@maasai_princess - 4 months ago

Quoted - godswillfx

Key Points for Forex Traders:

- Positive expectancy (> 0) = Profitable system over time.

- Negative expectancy (< 0) = Losing system, no matter how good it "feels."

- A high win rate with small wins and big losses can still give negative expectancy.

- A lower win rate with big wins and small losses can give strong positive expectancy.

Good but I wont have the time to do all these calculations

@godswillfx - 4 months ago

Quoted - maasai_princess

Good but I wont have the time to do all these calculations

That's how you'll feel, but it might help