How do you evaluate a new setup idea?
New ideas arrive constantly — from books, forums, other traders. Most die in testing, and the evaluation process decides which ones get your time. The disciplined version: write the rules, backtest, forward test, then maybe trade small.
What's your funnel?
- how you screen ideas before testing
- the minimum evidence before live money
- an idea that passed or failed spectacularly
The expectancy guide gives the acceptance criteria.
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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