Grey1 said:

**Glen,**

Systems with **positive** expectancy are defined by the equation below.. The number of trade does not make the system less expectant..

Expectancy is defined by a simple formula = ( Average win* probability of win - Average loss* probabilty of loss )

If this value > 1 then we have a Pos expectancy system other wise we have a negative expectancy system

So if you had a **coin** system which would pay **even amount ** then

Expectancy would be = (1*1/2 -1*/1/2 ) = 0

How ever if you had a Coin system which would pay a** little more than even** if you won ' then the MORE you trade the system the more you win ,,

Regards

Gey1

So a positive expectancy means that the chances are more than 50% that each trade will be profitable.

This is how I figure the maths:-

Lets say we have two systems, both of which have a positive expectancy of 60%.

One system is short term and averages 10 points per trade, the other is longer term and averages 50 points per trade.

To keep things equal, lets say that the longer term trades last 5 times as long as the short term trades and we will take a fixed time period to make a comparison and both have the same percentage stop loss.

So we do 10 short term trades and 2 long term trades.

[Prob(A and B and C) = Prob(A) x Prob(B) x Prob(C) etc.]

The chances of all 10 short term trades making a profit is

60%x60%x60% .....x60% 10 times i.e. 0.36% chance of 100 points profit

The chances of the 2 longer term trades both making a profit is 60%x60% i.e. 36% chance of 100 points profit

This suggests that fewer bigger trades have more (10 times more) chance of winning the same amount in the same time period.

Glenn