Hot-hand thinking: do wins make you feel unbeatable?
The hot-hand fallacy extends winning streaks into the future: "I'm on fire, the next one's guaranteed". The feeling produces oversized trades exactly when caution is needed.
What's your experience?
- how winning streaks change your confidence
- the oversized trade the streak produced
- how you keep streaks in perspective
The expectancy guide shows streaks are statistical, not personal.
Background: Risk-reward ratio, win rate and expectancy: the maths behind a trading edge
A high win rate can still lose money. See how win rate and risk-reward combine into expectancy, with break-even win rates and worked examples.
What is a good risk-reward ratio in forex?
There isn't one right ratio. What matters is expectancy, the win rate and ratio together. A 1:2 ratio breaks even at about 33% winners before costs, while a 1:1 ratio needs 50%.
How do you calculate trading expectancy?
Multiply the win rate by the average win and subtract the loss rate multiplied by the average loss. Measuring wins and losses in multiples of the amount risked (R) makes the result easy to compare.
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