Analysis
Expectancy
The average profit or loss, in R, that a strategy produces per trade.
Expectancy is calculated as (win rate × average win in R) − (loss rate × average loss in R). A system winning 40% of trades with +2.5R winners and −1R losers has an expectancy of +0.4R per trade.
Positive expectancy is the definition of an edge, and it makes win rate almost irrelevant on its own: a 75% win rate with −3R losers and +0.5R winners is a losing system that feels excellent. Expectancy should be computed per setup, since one setup typically carries the result.
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