Back to path GUIDEBOOKExpectancy
UNIT 1

Expectancy

Expectancy combines win rate, payoff, and loss rate into one long-run average.

Per trade+0.12RLong-run average
What it tells you

Whether a repeated process has a positive estimated edge.

When it is useful
  • Comparing setups
  • Diagnosing win-rate traps
When it fails
  • Small samples are noisy
  • Averages hide tail risk
COMMON MISTAKE

Rejecting a positive process after a normal losing streak.

Evidence note

Statistical confidence and out-of-sample evidence matter as much as the point estimate.

60-SECOND CHEAT SHEET

Remember this.

  1. 1E = p(win)×win − p(loss)×loss
  2. 2Edge ≠ next outcome
  3. 3Sample size matters
NEXT ACTIVITYExpectancy MachineWatch positive expectancy emerge unevenly.
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