## Why high expectancy trading is so important

This is a discussion on Why high expectancy trading is so important within the First Steps forums, part of the Reception category; Originally Posted by jpadventure I love hearing the word &quot;Expectancy&quot;, game changer for me. Really simple... Win ratio's, risk reward, ...

Jun 18, 2011, 4:51pm   #9
Joined Jan 2008
Re: Why high expectancy trading is so important

Quote:
 Originally Posted by jpadventure I love hearing the word "Expectancy", game changer for me. Really simple... Win ratio's, risk reward, tight stops, doesn't matter what you do, is your method profitable?
+1

Truly silly buzzword. The bottom line is: are you making money?

Jun 22, 2011, 6:00pm   #11
Joined Jan 2008
Re: Why high expectancy trading is so important

Quote:
 Originally Posted by lcchong76 Formula of expectancy: Expectancy is made up of accuracy and payoff. Improving the accuracy and the average win-to-average loss payoff are important tools to reduce our risk of ruin.
As i said before this term is just a buzzword IMO. It has been shown in this blog to be mathematically equivalent to the simpler statement that the net profit is greater than zero.

If at the end of a given period you have made money, by definition the expectancy is greater than zero for the period. So what? What was the drawdown? The Sharpe ratio? The rate of return? Expectancy tells nothing really other than the fact that money was made. No serious trader should rely in a simplistic and naive formula like that.

Jun 23, 2011, 1:22pm   #12
Joined Nov 2007
Re: Why high expectancy trading is so important

Quote:
 Originally Posted by fibonelli Expectancy = (Avg win * Win rate) minus (Avg Loss * Loss rate)
Er

No.

Jun 23, 2011, 1:23pm   #13
Joined Nov 2007
Re: Why high expectancy trading is so important

Quote:
 Originally Posted by intradaybill As i said before this term is just a buzzword IMO. It has been shown in this blog to be mathematically equivalent to the simpler statement that the net profit is greater than zero. If at the end of a given period you have made money, by definition the expectancy is greater than zero for the period. So what? What was the drawdown? The Sharpe ratio? The rate of return? Expectancy tells nothing really other than the fact that money was made. No serious trader should rely in a simplistic and naive formula like that.
This is also wrong. All of it. Sorry.

Edit: Actually no, I missed your 'for the period'. But your formula is wrong in this context. Also the idea that you should use expectancy for a discrete period is wrong in this context.

 Jun 24, 2011, 4:43pm #14 Joined Jun 2011 Re: Why high expectancy trading is so important Expectancy is the realization that if you follow a definite plan which has been tested and is profitable, then you will become a consistently profitable trader. Anything less, is your mental problems getting in the way.
 Jun 26, 2011, 8:13pm #15 Joined Nov 2007 Re: Why high expectancy trading is so important no.
 Mar 21, 2012, 9:39pm #16 Joined Dec 2008 Re: Why high expectancy trading is so important Watch this video : Tutorial Movies