A Practical Guide to Figuring Out if What You’re Doing Is Actually Working
There comes a point in every trader’s journey when you stop asking “what indicator should I use” and start asking something much more important.
Is what I’m doing actually working?
It’s an honest question. When the P&L has been chopping sideways or dipping red for weeks, it’s easy to feel stuck. Maybe you’ve been grinding for months, jumping from one setup to another, but still not seeing consistent progress. Before you give up or double down, it’s worth stepping back and looking at the one thing that matters most.
Do you have an edge?
What Is a Trading Edge, Really?
A trading edge isn’t about being right all the time. It isn’t some secret indicator or a feeling in your gut. It’s a cold, hard number.
Your edge is the amount of money you can expect to make or lose on average every time you place a trade. If the number is positive, you’re on the right side of probability. If it’s negative, then no amount of motivation or mindset work will stop the account from bleeding over time.
Thankfully, there’s a simple formula that tells you exactly where you stand.
The Formula: No Hype, Just Maths
Edge per trade = (Average Win × Win Rate) − (Average Loss × Loss Rate)
Or more simply:
Edge = W × R – L × (1−R)
Where:
• W is your average winning trade in pounds
• L is your average losing trade (as a positive number)
• R is your win rate, written as a decimal (so 55% becomes 0.55)
This is your trading edge. It’s not a concept. It’s a number. And it either works or it doesn’t.
Let’s Put It Into Practice
Say you win 45% of the time. Your average winning trade makes £180. Your average losing trade costs £120. Plug the numbers in.
Edge = £180 × 0.45 minus £120 × 0.55
Edge = £81 minus £66
Edge = £15
That £15 is your expected value per trade. So if you take 100 trades following that same pattern, you’d expect to make £1,500 before costs. That’s the kind of maths you want working in your favour. It’s not glamorous. It’s not loud. But it’s sustainable.
What if the Edge Is Negative?
This is where a lot of traders lose heart. But it’s actually good news. If the formula tells you the edge isn’t there, you can stop guessing. It means you’ve identified the problem.
A negative edge just tells you that, on balance, either:
• you’re winning too infrequently
• your losses are too large
• your winners aren’t big enough
And every one of those can be adjusted. This isn’t about tearing down your whole system. Often, a small shift in one variable is all it takes to turn a negative edge into a positive one.
Three Ways to Nudge the Numbers in Your Favour
1. Improve the win rate slightly
Look for trades with more confluence. Stick to clearer trends. Avoid taking marginal setups during unpredictable conditions. You don’t need a huge jump, even going from 40% to 47% can have a big impact.
2. Increase the size of your winners
Let trades run a little longer when the conditions are right. Take partials if it helps your mindset, but keep a portion on to capture the extended move. Most traders cut profits too early and let losers drift too far.
3. Tighten up the losses
Use hard stops. Respect them. Review your biggest losing trades and ask yourself if they really had to be that big. Often they didn’t. The goal is to keep losses small and repeatable, not devastating and unpredictable.
A Note on Sample Size
Five or ten trades won’t give you a reliable read on your edge. You need a bigger pool. Ideally 50 to 100 trades minimum. Patterns emerge over time, not in the heat of one session.
A strong edge can go through losing streaks. A poor strategy can get lucky for a while. But when you track your numbers over enough trades, the truth becomes very clear.
You’re Probably Closer Than You Think
If you’ve never done this calculation before, don’t feel behind. Most retail traders never actually work out their edge. They focus on indicators, entry techniques, or mindset work without ever stopping to ask if the numbers stack up.
But once you do the maths, things start to change. You stop judging yourself by your last trade and start thinking in averages. You stop chasing every setup and start focusing on quality. You stop worrying about being right, and start focusing on being consistent.
That’s what separates hobbyists from professionals. The numbers are the difference.
Summary:
If your edge is negative, you now know where to look. If it’s positive, even just slightly, you’ve got something worth building on. Either way, the path forward is clearer.
Trading is hard, no question. But it’s not magic. It’s probability, risk control and discipline applied consistently. And it all starts with understanding the maths behind what you’re doing.
So next time you’re questioning whether your system is any good, don’t ask how it feels. Run the numbers.
Do you have a trading edge?
If yes, protect it. If not, now you know what to fix.
Disclaimer: This is for information and learning purposes only. The information provided does not constitute investment advice nor take into account the individual financial circumstances or objectives of any investor. Any information that may be provided relating to past performance is not a reliable indicator of future results or performance. Social media channels are not relevant for UK residents.
Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 85.24% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work and whether you can afford to take the high risk of losing your money.
There comes a point in every trader’s journey when you stop asking “what indicator should I use” and start asking something much more important.
Is what I’m doing actually working?
It’s an honest question. When the P&L has been chopping sideways or dipping red for weeks, it’s easy to feel stuck. Maybe you’ve been grinding for months, jumping from one setup to another, but still not seeing consistent progress. Before you give up or double down, it’s worth stepping back and looking at the one thing that matters most.
Do you have an edge?
What Is a Trading Edge, Really?
A trading edge isn’t about being right all the time. It isn’t some secret indicator or a feeling in your gut. It’s a cold, hard number.
Your edge is the amount of money you can expect to make or lose on average every time you place a trade. If the number is positive, you’re on the right side of probability. If it’s negative, then no amount of motivation or mindset work will stop the account from bleeding over time.
Thankfully, there’s a simple formula that tells you exactly where you stand.
The Formula: No Hype, Just Maths
Edge per trade = (Average Win × Win Rate) − (Average Loss × Loss Rate)
Or more simply:
Edge = W × R – L × (1−R)
Where:
• W is your average winning trade in pounds
• L is your average losing trade (as a positive number)
• R is your win rate, written as a decimal (so 55% becomes 0.55)
This is your trading edge. It’s not a concept. It’s a number. And it either works or it doesn’t.
Let’s Put It Into Practice
Say you win 45% of the time. Your average winning trade makes £180. Your average losing trade costs £120. Plug the numbers in.
Edge = £180 × 0.45 minus £120 × 0.55
Edge = £81 minus £66
Edge = £15
That £15 is your expected value per trade. So if you take 100 trades following that same pattern, you’d expect to make £1,500 before costs. That’s the kind of maths you want working in your favour. It’s not glamorous. It’s not loud. But it’s sustainable.
What if the Edge Is Negative?
This is where a lot of traders lose heart. But it’s actually good news. If the formula tells you the edge isn’t there, you can stop guessing. It means you’ve identified the problem.
A negative edge just tells you that, on balance, either:
• you’re winning too infrequently
• your losses are too large
• your winners aren’t big enough
And every one of those can be adjusted. This isn’t about tearing down your whole system. Often, a small shift in one variable is all it takes to turn a negative edge into a positive one.
Three Ways to Nudge the Numbers in Your Favour
1. Improve the win rate slightly
Look for trades with more confluence. Stick to clearer trends. Avoid taking marginal setups during unpredictable conditions. You don’t need a huge jump, even going from 40% to 47% can have a big impact.
2. Increase the size of your winners
Let trades run a little longer when the conditions are right. Take partials if it helps your mindset, but keep a portion on to capture the extended move. Most traders cut profits too early and let losers drift too far.
3. Tighten up the losses
Use hard stops. Respect them. Review your biggest losing trades and ask yourself if they really had to be that big. Often they didn’t. The goal is to keep losses small and repeatable, not devastating and unpredictable.
A Note on Sample Size
Five or ten trades won’t give you a reliable read on your edge. You need a bigger pool. Ideally 50 to 100 trades minimum. Patterns emerge over time, not in the heat of one session.
A strong edge can go through losing streaks. A poor strategy can get lucky for a while. But when you track your numbers over enough trades, the truth becomes very clear.
You’re Probably Closer Than You Think
If you’ve never done this calculation before, don’t feel behind. Most retail traders never actually work out their edge. They focus on indicators, entry techniques, or mindset work without ever stopping to ask if the numbers stack up.
But once you do the maths, things start to change. You stop judging yourself by your last trade and start thinking in averages. You stop chasing every setup and start focusing on quality. You stop worrying about being right, and start focusing on being consistent.
That’s what separates hobbyists from professionals. The numbers are the difference.
Summary:
If your edge is negative, you now know where to look. If it’s positive, even just slightly, you’ve got something worth building on. Either way, the path forward is clearer.
Trading is hard, no question. But it’s not magic. It’s probability, risk control and discipline applied consistently. And it all starts with understanding the maths behind what you’re doing.
So next time you’re questioning whether your system is any good, don’t ask how it feels. Run the numbers.
Do you have a trading edge?
If yes, protect it. If not, now you know what to fix.
Disclaimer: This is for information and learning purposes only. The information provided does not constitute investment advice nor take into account the individual financial circumstances or objectives of any investor. Any information that may be provided relating to past performance is not a reliable indicator of future results or performance. Social media channels are not relevant for UK residents.
Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 85.24% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work and whether you can afford to take the high risk of losing your money.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.