What you will learn
- Win rate and payoff
- Expectancy
- Profit factor limitations
- Drawdown and exposure duration
Win rate and payoff
Win rate is winning trades divided by the defined total, with a stated treatment of breakevens. Payoff compares average win with average loss magnitude. Neither measure alone establishes positive expectancy.
Expectancy
Expectancy is the average net result per trade or per recorded risk unit under the chosen definition. Use complete records and consistent denominators. Averages of percentages with changing exposures need careful interpretation.
Profit factor limitations
Profit factor is gross winning amounts divided by absolute gross losing amounts under a stated cost convention. With no losses, the ratio is undefined or unbounded in the sample, not proof of infinite quality.
Drawdown and exposure duration
Drawdown measures decline from a prior equity peak. Exposure duration and open equity matter: a closed-trade summary can miss interim risk. State whether drawdown uses balance, daily equity or finer marked-to-market observations.
Worked example
A sample has six wins of 10 and four losses of 20. Win rate is 60%, total result is −20 and average result is −2 before costs. The high win rate does not rescue the negative average.
Try it yourself
Calculate profit factor for the sample and explain how the result relates to total P&L.
Show the worked solution
Winning amounts total 60 and losses total 80, so profit factor is 0.75. The ratio below one is consistent with a negative gross total. Costs would worsen the result if not already included.
Apply this to your course project
Produce a weekly report that reconciles net P&L and explains uncertainty in small groups.
Keep the calculation inputs, assumptions and decisions with your work. Practical exercises are self-reviewed; the scored knowledge checks assess the questions shown, not an independent certification of practical competence.