Expectancy & R Math
Intro
Expectancy tells you how much you expect to make per unit risk over many trades — the core metric for a strategy's viability.
Step-by-step
- Compute average win (R) and average loss (R).
- Expectancy = (winrate * avg win) - (lossrate * avg loss).
- Use expectancy to size and choose strategies.
GOLD example
If your XAU/USD strategy wins 52% with avg win 1.8R and avg loss 1R, plug into expectancy to estimate per-trade expectation.
Common mistakes
- Ignoring variance — expectancy is long-run, not short-run.