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Probability
FundamentalsThe likelihood of an outcome occurring, expressed as a percentage. In trading, probability drives expectancy calculations and helps traders think in terms of distributions rather than individual trade outcomes.
Related Terms
Expectancy
A measure of the average amount you can expect to win or lose per trade: (Win Rate x Avg Win) - (Loss Rate x Avg Loss).
Win Rate
The percentage of trades that are profitable.
Monte Carlo Simulation
A statistical method that runs thousands of randomized trade sequences to model the range of possible portfolio outcomes.