Expectancy

Expectancy is the statistical measure of the average profit or loss a trader can expect per unit of risk over a large number of trades. It combines the win rate, the average win size, and the average loss size into a single metric.

A positive expectancy indicates a strategy that is profitable in the long run, regardless of the outcome of any individual trade. Traders use this to evaluate the viability of their setups and to compare different trading systems.

In the context of derivatives, expectancy helps in determining the sustainability of a strategy under various market conditions. It emphasizes the importance of consistency over the desire for quick, large gains.

By focusing on expectancy, a trader shifts their mindset from guessing the next move to managing a probability-based business. It is the ultimate metric for measuring trading performance and strategic edge.