diff --git a/docs/edge.md b/docs/edge.md
index cab2de748..d5648d9df 100644
--- a/docs/edge.md
+++ b/docs/edge.md
@@ -22,16 +22,20 @@ The answer comes to two factors:
Means over X trades what is the perctange of winning trades to total number of trades (note that we don't consider how much you gained but only If you won or not).
-
+W = (Number of winning trades) / (Number of losing trades)
### Risk Reward Ratio
Risk Reward Ratio is a formula used to measure the expected gains of a given investment against the risk of loss. it is basically what you potentially win divided by what you potentially lose:
-
+R = Profit / Loss
Over time, on many trades, you can calculate your risk reward by dividing your average profit on winning trades by your average loss on losing trades:
-
+average profit = (Sum of profits) / (Number of winning trades)
+
+average loss = (Sum of losses) / (Number of losing trades)
+
+R = (average profit) / (average loss)
### Expectancy
@@ -39,6 +43,10 @@ At this point we can combine W and R to create an expectancy ratio. This is a si
Expectancy Ratio = (Risk Reward Ratio x Win Rate) – Loss Rate
+So lets say your Win rate is 28% and your Risk Reward Ratio is 5:
+
+Expectancy = (5 * 0.28) - 0.72 = 0.68
+
Superficially, this means that on average you expect this strategy’s trades to return .68 times the size of your losers. This is important for two reasons: First, it may seem obvious, but you know right away that you have a positive return. Second, you now have a number you can compare to other candidate systems to make decisions about which ones you employ.
It is important to remember that any system with an expectancy greater than 0 is profitable using past data. The key is finding one that will be profitable in the future.