Expectancy
Average profit or loss per trade over a sample, net of costs.
In plain English
Combines win rate with average win and average loss. Usually expressed in R so it is comparable across instruments.
Example
(win rate x average win) - (loss rate x average loss).
See also
Used in these lessons
- Why Risk Comes First
- Risk/Reward and Expectancy
- Why Discipline Fails
- Building a Review Routine
- Handling a Losing Streak
- Overtrading and Revenge Trading
- Process Goals versus Outcome Goals
- Anatomy of a Trading Plan
- Backtesting and Forward Testing
- Journaling and Metrics
- Position Management and Scaling
- Strategy Types: A Neutral Overview