Recently, many traders have been struggling to understand the reasons for their losses. The core issue boils down to one word—not understanding what positive EV (expected value) really means.

Let me give a simple example: you’re playing a coin toss game at a casino, where a head wins 2 dollars and a tail loses 1 dollar, each with a 50% probability. What is your expected value? Calculating it: (2×0.5) + (-1×0.5) = 0.5, meaning that long-term, on average, you can earn 0.5 dollars per game. This is called positive EV.

Trading follows the same logic. We use a formula to understand:

Expected value = (Probability of winning × average profit) - (Probability of losing × average loss)

Many people make a mistake here—they think that just having a high win rate is enough, but in reality, the risk-reward ratio is equally important. For example, if you have a 60% win rate but only make 100 dollars per win and lose 500 dollars per loss, your expected value is actually negative, and you will inevitably lose money in the long run. Conversely, even with only a 40% win rate, if you can make 500 dollars per win and lose only 100 dollars per loss, your expected value is positive.

There’s also a common pitfall to avoid. Many say “expected value is the most likely outcome,” but that’s incorrect. The expected value of rolling a die is 3.5, but you can never roll a 3.5. Similarly, even if your strategy has a positive expected value, you can still experience consecutive losses in the short term because randomness is so cruel. Expected value only manifests over many repeated trades.

So, true trading experts focus on this—finding strategies with positive EV and then sticking to them long enough, allowing the power of probability to gradually push you toward profitability. It’s not about getting rich overnight, but about leveraging time and discipline to achieve compound growth based on positive EV. That’s the sustainable way to trade.