Statistical significance: do you think in p-values or vibes?
"It worked in backtest" usually means "it worked in one backtest". Statistical thinking asks whether the result could be luck, and the honest answer often surprises traders.
How rigorous are you?
- how you test whether a result is real
- the tools or approximations you use
- the result you now believe was luck
The expectancy guide is the gentle introduction.
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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