Expected value (EV)

The average outcome of a trade if you made it many times, weighing each result by its probability. A positive-EV trade makes money on average; a negative-EV trade loses.

EV is the core of disciplined trading: you compare your estimated probability to the contract's price, net of fees, to see whether the trade is positive-EV. Consistently taking positive-EV trades is what an edge actually means.

Expected value, or EV, is the average outcome of a trade if you could repeat it many times, weighting each result by its probability. It is the single most important concept in disciplined trading, because a positive-EV trade makes money on average even when any individual instance loses, and a negative-EV trade loses on average even when one instance happens to win.

On a binary market the EV of a YES contract is simple: the probability of winning times the payout, minus the cost. If you can buy at a price below the true probability, the trade is positive EV; above it, negative. Fees and the spread are subtracted from EV, which is why a trade that looks marginally positive on probability alone can be negative once costs are included.

Thinking in EV reframes trading away from outcomes and toward decisions. You cannot control whether a single contract wins, only whether you took positive-EV trades. Judged over enough trades, consistently positive EV is what produces profit, while a focus on individual wins and losses leads to chasing variance.