Forex glossary
Expectancy
A model's average net result weighted by its outcome probabilities. An estimate based on past results does not guarantee the result of another series.
Illustrative example
How does it work in practice?
A hypothetical model has net outcomes +150 USD with 40% probability and −80 USD with 60% probability. Expectancy is 12 USD per trial; the next trade need not produce that result.
A case to work through
A cost on either outcome
Model: 40% probability of a 200 USD win, 60% of a 100 USD loss; each trial costs another 5 USD.
- Before cost, the mean is 0.4 × 200 − 0.6 × 100 = 20 USD.
- A 5 USD cost reduces the mean to 15 USD.
What follows? Separate assumed probability from observed frequency.
Example boundary: Two outcomes simplify reality; this does not predict the next trade.
From gross mean to net
Text description of the diagram
- Weighted win: 40% × 200 = 80 USD.
- Weighted loss: 60% × 100 = 60 USD.
- Cost on every trial: 80 − 60 − 5 = 15 USD.
A useful distinction
Expectancy / Win Rate
Win rate measures the share of wins; expectancy also uses win size, loss size and costs.
Change an assumption, see the result
What changes if…?
Vary assumed probability, win, loss and per-trial cost; this is a two-outcome model.
Two fixed outcomes: p × win − (1 − p) × loss − cost. The win rate is an assumption, not measured performance. The sample, costs and actual outcome distribution may differ. If win plus loss is zero, the threshold is undefined.
Check your understanding
Calculate a modeled average after a cost on every trial.
Show the answer and explanation
20 USD
0.5 × 150 − 0.5 × 100 − 5 = 20.
Net results and risk measures
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Read the fuller explanation
Related terms
Sources and documentation
- MetaTrader 5: Trading Report
The report distinguishes results before and after swaps and commissions and reports drawdown of the selected balance or equity measure from a local peak.
Document read:
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