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Expectancy provides the expected outcome of a trading system over a given series of trades. Expectancy can be measured in ticks, dollars, pips etc.

The formula for expectancy is (Average Win * Winning Percentage) – (Average Loss * Losing Percentage).

Expectancy is used to:

  • Measure the performance of a system, setup or trader over time.
  • Assist in setting performance goals.
  • Help to determine what part of the system (from the expectancy equation) might need improvement.

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