Understanding Expectancy and Risk Management

Effective risk management is crucial in trading, as it significantly influences overall expectancy. A high win rate, such as 85% to 95%, can be misleading if it is accompanied by a few large losses that negate multiple gains. For instance, beginner traders often find themselves losing money despite a seemingly favorable win rate due to infrequent but substantial losses. The discussion emphasizes that understanding how small variations in loss size can dramatically impact long-term expectancy is vital for traders in developing sound strategies.