Glossary · Trading basics

Expected value (EV)

The average profit or loss per trade you would get if you repeated the same trade many times, given its win probability and payout.

By Sky Trade editorial teamUpdated November 5, 2026

Expected value is the long-run average result of a decision. For a fixed-payout trade: EV = p × payout × stake − (1 − p) × stake, where p is your real probability of winning. If EV is negative, repeating the trade makes you poorer on average, however good a single win feels.

Two things make EV slippery in practice. First, nobody knows p for certain; you can only estimate it from a large, honest record of trades. Second, a positive-looking estimate from 30 trades is mostly noise. Treat EV as a test of whether an idea could work at all, not as a forecast.

EV also exposes popular schemes. Doubling the stake after each loss — the martingale — does not change the EV of any individual trade; it only rearranges the outcomes into many small wins and rare, very large losses.

When p is 50%, as on a genuinely unpredictable price path, any payout below 100% gives a negative EV. The articles why most beginners lose and why martingale fails work through the numbers.

Example

With a $10 stake, an 80% payout and a true 55% chance of winning: EV = 0.55 × $8 − 0.45 × $10 = $4.40 − $4.50 = −$0.10 per trade.

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