Wick

Expectancy — the only number that matters

The Math of an Edge

What one trade is worth on average

Expectancy answers a single question: if I take this setup a hundred more times, what does each one earn me on average? The formula is plainer than it looks — (win rate × average win) minus (loss rate × average loss). Win 40% at $300 and lose 60% at $150: that's $120 minus $90, so every trade is worth $30 on average. Negative expectancy means the more you trade, the more you lose, and no amount of discipline fixes a strategy that is negative by design.

Check yourself

Expectancy = (win rate × avg win) − (loss rate × avg loss). At 40% wins of $300 and 60% losses of $150…

  1. −$30 a trade
  2. +$30 a trade correct
  3. +$150 a trade

(0.4 × 300) − (0.6 × 150) = 120 − 90 = +$30. Losing most of your trades and still making money is completely normal at that ratio.

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