Risk-Reward & Expectancy Calculator
What is Risk-Reward Ratio?
Risk-reward ratio compares the potential loss of a trade to the potential gain. A 1:2 risk-reward means you risk $1 to make $2. Combined with win rate, it determines your strategy's expectancy.
What is Expectancy?
Expectancy = (Win Rate × Avg Win) - (Loss Rate × Avg Loss). Positive expectancy means profitable. dMoERA's gatekeeper requires expectancy to be at least 1.5× the friction cost.
The 1.5× Friction Rule
dMoERA's risk gatekeeper rejects any trade where expected alpha is less than 1.5× the friction cost. With 12 bps friction, you need at least 18 bps alpha after fees.
Frequently Asked Questions
- What is a good risk-reward ratio for crypto?
- Most professional crypto traders use 1:2 or 1:3. With 1:2, you only need 34% win rate to break even. With 1:3, only 25%.
- What is expectancy in trading?
- Expectancy is the average profit or loss per trade: (win rate × avg win) - (loss rate × avg loss). Positive expectancy means profitable.
- What is the 1.5x friction rule?
- dMoERA's gatekeeper rejects trades where expected alpha is less than 1.5× the friction cost. With 12 bps friction, you need 18 bps alpha minimum.
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