Trading, structure and order flow
Expectancy
Whether your method makes money long term, and from what win rate it starts to.
What it is for
To answer the only question that decides whether a method works: does it make money repeated many times? Win rate alone does not say, and it is the number most people fool themselves with.
How to use it
- 1Take the three numbers from your trade log, not from memory. Under thirty trades the result is only indicative.
- 2Average loss goes in as a positive number: it is a magnitude, not a balance.
- 3If you are not trading yet, try your plan's expected ratio and see what win rate it would need.
How to read it
Expectancy is what an AVERAGE trade wins or loses. When negative, no good streak fixes it: it only delays the ending.
The break-even win rate is the actionable figure. At a 3-to-1 ratio, one in three is enough; at 1-to-1 you need more than half. That is why 40% at 1:3 beats 70% at 1:1.
Expectancy in R is the one you can compare across methods and accounts, because it does not depend on your size.
The terms that appear here
All the calculators
- Position sizeHow many units you can open without exceeding the risk you decided on.
- Option break-evenThe price at which your option actually starts winning, and what it can cost you.
- Compound interestWhat your monthly saving turns into, and how much of it you actually put in.
- Emergency fundHow much cushion you need, how much is missing and how long it will take.