Mathematical Expectation Calculator

Mathematical Expectation Calculator

This mathematical expectation calculator demonstrates the value of letting your profits run and cutting your losses short when you start to trade and don’t yet have a reliable currency trading system to follow. When you begin to trade your accuracy tends to be low. To compensate for the larger number of losses you absolutely have to let your profits run and keep you losses small. This will ensure that the profits from the few winners that you are able to capture will more than cover the total loss from all the losses that you take. Not allowing your profits to run at the start of your trading career would simply be "suicidal". This boils down to selecting the trades only with high reward/risk ratios. This will help to improve your payoff ratio and, therefore, your profit potential.

As you can also see from the initial values of the above calculator, systems with different accuracy and payoff ratios can have identical mathematical expectations. This means, for example, that in the long run the profit that you can achieve with the system that is the first in the table will be equal to the profit that you will make using the second system - even if the second system is twice as accurate as the first one.

Note: You can model various equity development scenarios under the positive, the negative or the zero mathematical expectations by entering the initial accuracy and the payoff values of this calculator in the system controls on the forex trading simulator.

Mathematical Expectation Calculator
       
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