Steven Joseph D622_ Wilson

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What is expectancy bias in trading?

Expectancy bias occurs when traders overestimate the profitability of a system based on selective memory or small sample sizes. They may ignore losing trades or assume early wins guarantee long-term success. This bias leads to overconfidence and oversized risk. Overcoming expectancy bias requires large sample backtesting, forward testing, and objective statistics. Focusing on expectancy over hundreds of trades rather than short-term outcomes ensures realistic expectations.