What Is Mathematical Expectancy in Trading?
Mathematical expectancy is the average expected value per trade, considering win probability, average win, loss probability, and average loss. It answers: If I run this strategy a thousand times, will I make or lose money?
Mathematical Expectancy Formula
E = (Win Rate × Average Win) - (Loss Rate × Average Loss)
Example: 50% win rate, $200 average win, 50% loss rate, $100 average loss:
E = (0.50 × $200) - (0.50 × $100) = $100 - $50 = $50 per trade — positive expectancy.
Interpreting Expectancy
- Positive E: profitable strategy long-term
- Zero E: neutral strategy
- Negative E: losing strategy
How to Use Expectancy to Improve Your Strategy
- Calculate expectancy per setup separately
- Eliminate setups with negative or neutral expectancy
- Concentrate capital on setups with the highest expectancy
- Reassess every 50 new trades
Calculating Your Expectancy with ForexTracker
ForexTracker automatically calculates your mathematical expectancy from logged trades, segmented by pair, session, and setup type. Just log trades and the app shows which strategies have a real edge.
Find out if your strategy has positive expectancy. Log your trades at app.forextracker.com.br.