Expectancy
Risk & psychologyAverage profit per trade, calculated as (win rate × average win) − (loss rate × average loss).
In plain terms
Positive expectancy is what "edge" means. A high win rate is neither necessary nor sufficient.
1492 terms
Glossary
Every term is defined twice: once the way a filing would put it, and once the way somebody would explain it to you across a table. The second one is usually the one that sticks.
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Edge
Risk & psychologyA repeatable advantage that produces positive expectancy over many trades.
In plain terms
It has to survive costs. An edge that only works before costs is not one.
Partial exit
Technical analysisSelling part of a position while retaining the remainder.
In plain terms
Reduces volatility and expectancy together. Worth it only if it lets you hold the rest calmly.
Risk of ruin
Risk & psychologyThe probability that losses reduce capital to a point from which recovery is impractical.
In plain terms
A positive-expectancy system can still destroy an account. Position size decides which.
Signal filter
Technical analysisAn additional condition required before a trading signal is acted on.
In plain terms
Every filter removes good trades along with bad. Judge it on expectancy, never on win rate.