Who this is for — Traders who treat each trade as «I must be right» and collapse after 2–3 losses. Market is probabilistic: think in samples.
Probability in trading = accept next trade outcome is uncertain, while system edge emerges over N executions. Analysis does not guarantee the single click — it guarantees repeatable process.
In plain terms — Casino does not know next hand; knows it wins over 10,000 hands. Operate as casino, not emotional player.
Expectancy
EV = (Win% × Avg Win) − (Loss% × Avg Loss)
| Metric | Role |
|---|---|
| Frequency, not sufficient alone | |
| Payoff / R:R | How much you win vs lose |
| System verdict |
High win rate with huge avg loss = ruin («90% win» strategies).
Operational impact
- After drawdown: execute valid setup — sample does not end at trade 3
- Stop: moving it destroys EV
- Revenge: treat loss as operating cost, not debt to settle now
Typical mistake — Skip A+ setup after 3 losses «enough for today» — confuse variance with lost edge.
Example — 45% win, avg +2R / −1R → EV = 0.45×2 − 0.55×1 = +0.35R/trade. 100 trades ≈ +35R.
Summary sheet
- Unit: sample (50–100+ trades), not single.
- Key metric: expectancy in R.
- Psychology: accepting variance = discipline.
Silver path — Setup module. Index: Silver path.
Links
Sources
- Van Tharp Institute, Tharp Think Trading Concepts — connects win probability, average win, and average loss in expectancy.
- Investor.gov, Performance Claims — reminds readers that past performance and projections do not guarantee future results.
- CME Group, Download the Trade Plan — connects a written plan with reducing emotional decisions.