Core Metric 01 / 05
Expected Value (EV)
“Is there edge?”
Expected Value is the master metric of MARS. It measures whether the trading system produces a positive average outcome per unit of risk over repeated execution. Profit is what happened; expectancy is what the system is mathematically worth.
The formula, derived
MARS measures EV in R — multiples of initial risk — so expectancy is comparable across account sizes, instruments, and time.
How MARS uses this
The Weekly Scorecard converts branch hit probabilities into EV and tags each week GREEN / YELLOW / RED by threshold. The rolling line is what MARS actually trusts: single-week readings are treated as noise until the rolling window confirms direction, and RED weeks trigger doctrine — reduced aggression and review — rather than negotiation.
How it benefits you
You learn to distinguish a bad week from a broken system. Variance stops triggering rule changes, and genuine expectancy decay gets caught while it is still one line on a chart instead of a hole in the account — the difference between rolling and static EV, made visible.
Weekly EV tagged GREEN / YELLOW / RED against expectancy thresholds, with the rolling-EV line separating persistent edge from one lucky week.
Interactive — run your own profile
Instrument 01 / 03 — EV Sensitivity
How much decay can your edge absorb?
A single expectancy number is a snapshot. Sensitivity is the doctrine: recompute EV across a ±5-point win-rate window and project the variance a positive edge still has to survive.
Expectancy / trade
+0.10R
GREEN
Decay tolerance
+4.0pp
breakeven sits at 40.0% win rate
Sensitivity strip — EV across win rate ±5pp
39%
-0.03
40%
+0.00
41%
+0.02
42%
+0.05
43%
+0.07
44%
+0.10
45%
+0.13
46%
+0.15
47%
+0.17
48%
+0.20
49%
+0.22
ring = your input · gold edge = the breakeven cell · values in R per trade
The variance cone — cumulative R, next 100 trades, 80% envelope
Roughly eight in ten 100-trade sequences land inside the cone. Note what the lower edge does even when the centerline is positive: variance is a budget your edge must be able to pay, not an excuse.
This strip tests one variable in one direction. The full EV Sensitivity Lab stresses win rate, payoff, fees, and branch mix simultaneously — and tells you which variable your edge dies by first. The EV Sensitivity Lab ships in MARS Lite →
Open the full Foundry Lab sandbox ↗Computed locally in your browser. Nothing is uploaded.
How MARS reads it
Technical explanation
EV exists at multiple layers inside MARS: Normal EV, Trend Partial EV, Trend No-Partial EV, Overflow EV, Trend Blend EV, All-Blended EV, weekly EV, monthly EV, rolling EV, and structural EV. A blended number can hide branch weakness — MARS decomposes it so the operator can see where edge actually comes from.
The Weekly Trading Scorecard converts branch-level hit probabilities into branch EV, blends them by the live weight profile, and tags each week GREEN, YELLOW, or RED by expectancy thresholds.
EV is the reason the system deserves capital at all. Positive and stable EV means deployable edge. Positive but unstable EV means caution. Thin EV can be destroyed by fees and slippage. Negative EV means the system should not be deployed aggressively.
EV never stands alone. A high EV reading achieved with expanding drawdown, inefficient risk deployment, or weak profit quality is not clean alpha — the four supporting metrics must confirm it.
Interpretation bands
Strong. Neutral. Weak.
Strong
Positive, stable across branches and windows, confirmed net of fees, with supporting metrics aligned.
Neutral
Positive but unstable or thin; tradable with caution, reduced sizing, and increased sample verification.
Weak
Negative, deteriorating, or dependent on outliers — capital deployment should compress regardless of recent P&L.
Use cases
Where it earns its place
- ▸Validating whether a new strategy has real, statistically credible edge before scaling risk
- ▸Weekly GREEN / YELLOW / RED expectancy tagging via the Weekly Trading Scorecard
- ▸Branch-level diagnosis: identifying which branch produces edge and which leaks it
- ▸Comparing live realized EV against the modeled EV assumed by the Monte Carlo benchmark
- ▸Deciding whether fee drag and friction are consuming a thin edge
Edge cases
Where it can mislead
- !Small samples: a strong week of 6 trades proves nothing — EV requires sufficient sample before it is trusted, which is why MARS uses insufficient-sample states.
- !Outlier distortion: one +8R fat-tail trade can make monthly EV look elite while median behavior is mediocre. The Advanced EV Analytics Lab tests EV robustness without outliers.
- !Variance masquerading as edge: temporary favorable sequences inflate EV. Rolling EV and stability tracking separate signal from luck.
- !Oversized-risk EV: EV can be temporarily boosted by overexposure. RAER and RAPF exist to catch exactly this.
Example scenarios
The metric in the wild
Positive EV, expanding drawdown
Weekly EV reads +0.42R, but drawdown has moved from 6% to 14%. MARS does not celebrate the EV — the gate ladder compresses risk authority while the edge is re-verified under pressure.
Green profit, red expectancy
A week closes +3.1R on two lucky no-partial runners while Normal branch EV went negative. The blended P&L looks healthy; the branch decomposition shows the compounding engine is deteriorating.
Thin edge, heavy friction
Gross EV is +0.11R but fee R-drag averages 0.07R per trade. Net expectancy is nearly zero — the system flags friction, not strategy, as the repair priority.
Monte Carlo connection
The Monte Carlo benchmark runs on modeled expectancy. If live EV runs below simulated EV, live equity will drift under the median path. If live EV matches, behavior should sit inside the envelope. If live EV exceeds modeled EV while drawdown stays controlled, that is where genuine alpha begins.
Monte Carlo Lab →Live benchmark comparison
Live weekly and monthly EV is compared against the expectancy assumptions of the Dynamic Seven-Tier MC Benchmark. Deviation is classified as favorable alpha, normal variance, execution drag, or governance failure — never judged by feel.
7-Tier MC Benchmark →Go deeper
Operator briefs on this territory.
Deep dive — 01
Expectancy arithmetic: what a trade is worth before it happens.
The EV formula walked end to end — why per-trade worth beats realized P&L as the master metric.
Read the full brief →
Deep dive — 02
Reading the fan: Monte Carlo without self-deception.
What the percentile bands actually promise, why P10 governs sizing, and where simulation authority ends.
Read the full brief →
Deep dive — 03
MAE/MFE: what your trades did while you weren't looking.
Reading maximum adverse and favorable excursion to audit stops, targets, and exits with evidence.
Read the full brief →
EV is calculated for you — automatically.
Every reading on this page is produced, tracked, and interpreted inside the MARS workbook ecosystem.