Expectancy
Also called: trading expectancy, win rate
The average result per trade, equal to win rate times average win minus loss rate times average loss, after costs.
A strategy that wins most of the time can still have negative expectancy if its losses are much larger than its wins. Expectancy estimated from small samples or biased backtests is very uncertain.
Example
Winning 70% of trades at ₹2,000 and losing 30% at ₹6,000 gives an expectancy of −₹400 per trade.
Learn more in these lessons
- Expectancy, losing streaks and risk of ruinCan a strategy that wins most of the time still lose money?
- BacktestingHow do you test a trading idea on past data properly?
Related terms
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