Stock Market Glossary
Expected value
Statistical average return of a strategy per trade.
In brief: Statistical average return of a strategy per trade.
Meaning in practice
The expected value combines hit rate and average win-loss ratio. A low hit rate strategy can be profitable if winners are significantly larger than losers. Without a positive expected value, any short-term winning streak is just a coincidence.
Context for investors and traders
The term helps put market information into context. Its relevance depends on the instrument, investment horizon and current market situation, so it should be read with other data and a personal risk framework.
How to use this in practice
Use the term first to describe the situation and add verifiable data: time frame, benchmark, costs and liquidity. Only then does it become an assessment that can be connected to an investment objective and risk budget.
What to keep in mind
Avoid false precision. Many market terms describe probabilities or historical patterns; they neither guarantee a return nor replace the review of a specific security.
