Trading expectancy helps you understand how much profit or loss you can expect from each trade over time. Learn how win rate and risk-to-reward ratio work together to determine your long-term trading performance. 📈💰
Trading expectancy is calculated using the formula: Expectancy = (Win Probability × Average Win) - (Loss Probability × Average Loss). This metric tells you the average amount you can expect to win or lose per dollar risked over a large sample of trades.
Understanding expectancy is vital for prop firm trading. Even with a high win rate, a poor risk-to-reward ratio can easily destroy your account when facing strict daily loss limits and drawdown rules. Always test your edge over dozens of trades before scaling up.
How do you calculate and track your expectancy? Drop your thoughts below, and check out our community guidelines at Community Guidelines!
