Trading glossary
Expectancy
Expectancy is the average amount you can expect to gain or lose per trade, calculated by multiplying each outcome's probability by its payoff and summing the results. A positive expectancy means that over enough trades the strategy should make money even if individual trades lose. Expectancy is the single most useful summary of whether an edge exists, because it combines win rate and average win versus average loss into one number. In a journal like Traders Vault, expectancy is computed automatically from your trade history and can be filtered by strategy or setup to show which variations of your trading are worth scaling.
What is Expectancy in trading?
Expectancy is the average amount you can expect to gain or lose per trade, calculated by multiplying each outcome's probability by its payoff and summing the results. A positive expectancy means that over enough trades the strategy should make money even if individual trades lose. Expectancy is the single most useful summary of whether an edge exists, because it combines win rate and average win versus average loss into one number. In a journal like Traders Vault, expectancy is computed automatically from your trade history and can be filtered by strategy or setup to show which variations of your trading are worth scaling.