The most necessary metric in your commercialism career

Here’s the thing:

You can have a one to a pair of risk to reward on your trades. however if you simply win 2 hundredth of the time, you'll be a regular loser.

Now clearly your risk to reward isn’t the solution. Then what is? Your win rate?

Let’s see…

Perhaps you have got a ninetieth win rate. however if you lose $0.95 for each greenback you risk, you'll even be a regular loser.

So, what’s the solution?

Clearly, your risk to reward and win rate ar nonsense on its own.

Well, the key is this…

…you should mix each your win rate and risk to reward to see your profit within the long-term.

And this is often referred to as your expectancy.

Your expectancy can provide you with associate degree expected come back on each greenback you risk.

Mathematically it will be expressed as:

E= [1+ (W/L)] x P – one

Where:

W means that the scale of your average wins

L means that the scale of your average loss

P means that winning rate

Here’s associate degree example:

You have created ten trades. half dozen were winning trades and four were losing trades. which means your share win quantitative relation is 6/10 or hour. If your six trades brought you a profit of $3,000, then your average win is $3,000/6 = $500. If your losses were solely $1,600, then your average loss is $1,600/4 = $400.

Next, apply these figures to the expectation formula:

E= [1+ (500/400)] x zero.6 – 1 = 0.35 or 35%.

In this example, the expectation of your commercialism strategy is thirty fifth (a positive expectancy). this suggests your commercialism strategy can come back thirty five cents for each greenback listed over the long run.