What's the role of luck in beginner wins?
Early wins are often luck wearing a strategy costume, and they're dangerous precisely because they feel earned. The beginner who wins three straight trades with no edge has been set up to size up and give it all back.
Did you have beginner's luck?
- your first wins and what you believed about them
- when you realised luck had been doing the work
- how you tell luck from edge now
The expectancy guide gives the maths for telling them apart.
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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