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The question of an edge


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The question of an edge

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 kevinkdog   is a Vendor
 
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Grantx View Post
Would you mind explaining the best way of calculating expectancy? avg trade/avg losing trade doesnt factor in how much was risked per trade and according to The Van Tharpe website this needs to be part of the calculation.

Van Tharpe expectancy

TIA.

It is easy.


What most people call "expectancy" is just average trade value (#1 in both screenshots below)

Van Tharp also has something that is a risk adjusted expectancy, I call it Tharp Expectancy. It is #1 /(-#2) Tharp has made it confusing, because he changed his definition of Expectancy at one point.

In his calculation, he is considering risk to be, on average, the amount of an average losing trade. That can be debated, but that is what his calculation uses.




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