Expectancy
Volume Profile Analysis glossary · Volume Profile Technicals
Definition
The expected profit per trade of a strategy, computed as E = w· W̄ - (1-w)· L̄, where w is win rate, W̄ average win, L̄ average loss.
Expectancy in plain English
Expectancy answers the one question that actually matters: over the long run, does this trading strategy make money on average, per trade? A strategy can win less than half the time and still be great if its wins are big and its losses are small — expectancy is what nets those two forces against each other. The formula E = w·barW - (1-w)·barL just means "how often you win times how much you win, minus how often you lose times how much you lose." Think of a claw machine that costs $1 per try: if you grab a $5 prize 30% of the time, your expectancy is 0.30×$5 - 0.70×$1 = $0.80 per play — positive, so keep playing; if it were negative, every pull quietly drains your wallet no matter how lucky you feel.
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