1. What is the Expected Value (EV) Equation?

The Expected Value (EV) equation calculates the average amount one can expect to win or lose per trade in the long run. It's a fundamental concept in probability and trading that helps evaluate the profitability of a trading strategy.

2. How Does the Calculator Work?

The calculator uses the EV equation:

Where:

• \( WR \) — Win Rate (decimal between 0 and 1)
• \( AW \) — Average Win (in currency)
• \( AL \) — Average Loss (in currency)

Explanation: The equation calculates the expected profit per trade by multiplying the win rate by average win, then subtracting the loss rate multiplied by average loss.

3. Importance of EV Calculation

Details: A positive EV indicates a profitable strategy in the long run, while negative EV suggests the strategy will lose money over time. It helps traders evaluate and compare different trading approaches.

4. Using the Calculator

Tips: Enter win rate as a decimal (e.g., 0.55 for 55%), average win and loss in your currency. All values must be positive numbers, with win rate between 0 and 1.

5. Frequently Asked Questions (FAQ)

Q1: What does a positive EV mean?
A: A positive EV means the strategy is profitable in the long run. The higher the EV, the more profitable the strategy.

Q2: Can I have a positive EV with a win rate below 50%?
A: Yes, if your average win is significantly larger than your average loss (good risk/reward ratio).

Q3: How many trades are needed to realize the EV?
A: EV is a long-term average. The more trades you make, the closer your actual results will match the EV.

Q4: Does EV account for trading costs?
A: No, you should include trading costs in your average win/loss calculations for accurate EV.

Q5: How can I improve my EV?
A: Either increase your win rate, increase your average win size, or decrease your average loss size.