How to build a profit-winning strategy based on expected value

Every trader dreams of a strategy, which will maximize profits with the smallest effort. But only after losing all the cash on wrong trades, he or she grabs a book about statistics and foreign exchange. Comprehending the definition of the system of connections within a single scheme is crucial in order to be successful in the long term. Basically, every strategy consists of rules for entering and exiting a trade and management. The Metatrader platforms give their user a possibility to create, test and implement strategies as expert advisor mt4, the most popular platform has all those features preinstalled and ready to use. To devise a personal scheme, you must state two things: the time horizon and your special theory. Only after you can move to the next step–the expected value. Do not confuse expected value with accuracy. Accuracy is a percentage of trades finished with a profit. But remember, if the numerous profits are lower than rare, but overwhelming losses, you will lose your cash quickly. This is the point, where some statistics must be applied. Expected value is a product of the probability of an event and a profit. Let’s analyze it using a coin toss. You can either get heads or tails with the same probability of 50%. If you bet $1000 on heads, your expected profit value is 50% times $1000 what equals $500 and the expected loss also amounts to $500. The same rule applies to any strategy. Metatrader has a convenient tool called Tester to do all the mathematics for you. MT4 uses historical data to test your strategy. If you want to boost the expected value of your scheme, follow the best traders using social trading. On various websites and platforms you can find information about the results of schemes similar to your concept. Do not forget that social trading gives you a chance to compare your idea with the events from the past, whereas the platform is based on simulation.