The Expectancy That No One Calculates

The Expectancy That No One Calculates

Most traders and fund managers can calculate the expectancy of a system. Far fewer can calculate the expectancy of themselves. And yet that internal expectancy often shapes performance more than any strategy ever will.

Positive expectancy in markets is familiar ground. The late Dr Van Tharp described it as the essential measure of whether a system has the capacity to thrive. If the math works over time and the rules are honoured, the edge appears.

We rarely apply the same thinking to the person running the system.

Your Internal Expectancy Is a Forecasting Model

We speak about risk, reward and probability with ease. Still we overlook the quiet machinery inside us that is also calculating expectancy every day. Our internal system is not simply a set of beliefs. It behaves much more like a forecasting model built from years of personal data.

If the model has not been updated, it keeps projecting old outcomes into new situations. It forecasts threat where none exists. It prices in disappointment before anything has happened. It treats present opportunities as if they were past risks.

Many people end up trading or managing capital with an outdated internal model. A model that undervalues their capability and overprices the emotional cost of being wrong.

The expectancy of the self becomes distorted long before the market adds its own uncertainty.

The Emotional Risk Premium

Markets price in risk premia. Humans do the same.

We all carry an emotional risk premium that shapes the cost of taking action.
Some require so much emotional certainty that opportunity never enters their portfolio.
Some accept emotional drawdown so quickly that expectancy collapses.
Some interpret internal volatility as danger rather than a normal part of growth.

This emotional premium influences performance more than we realise. It affects how we size risk, how quickly we abandon a good idea and how much we allow ourselves to pursue when conditions are favourable. It becomes invisible slippage in the execution of our lives.

Recalibrating Your Internal Model

So what would it take to build positive expectancy within yourself?

Your internal forecasting model needs accurate inputs.

What do you need to see about your own history with a clearer lens?
What do you need to hear in your inner dialogue that signals reality rather than inherited fear?
What do you need to feel in your body that shows readiness instead of collapse?
What do you need to believe about your own capability that reflects who you are now?

These are not motivational questions. They are diagnostic. They reveal how your internal model is calibrated.

A model with positive expectancy needs specific criteria:

• Evidence of times you adapted and succeeded even under pressure

• Sensations in the body that indicate stability, not bracing

• Language that supports follow through, not hesitation

• Beliefs that reflect both your real progress and your capacity to grow beyond it.

• Habits that reinforce execution, not fear of failure

Most people are not working with a neutral model. Human biology leans toward threat detection. Past experiences add more weight to that side of the distribution. This does not mean something is wrong.
It simply means the model has not been updated.

The Only Question That Matters

Is this internal model serving you?

Does it help you take calculated risks?
Does it support your capacity to grow?
Does it allow you to tolerate emotional volatility without abandoning your process?
Does it give you a fair expectation of what you can create next?

If not, you can rebuild it.
Not through positive thinking.
Through recalibration.

By feeding the model new evidence.
By adjusting the emotional risk premium you unconsciously charge yourself.
By teaching the nervous system that the future does not have to repeat the past.

Positive Expectancy of Self

Positive expectancy of self is not naive optimism. It is alignment.
A model that reflects your actual capability.
A way of moving through uncertainty that supports the expansion of your potential.
A recalibrated relationship with your own trajectory.

When the expectancy shifts internally, everything that follows shifts with it.

Closing Thoughts

Positive expectancy of self begins in a place we often overlook: how we see ourselves when no one is watching.  Behind many strategies sits a human being with hopes, fears and history.

Take care of the inner operator.  Take care of the system within and consider updating it.  Together they drive far more than performance.  Together they shape the future to come.

Thank you for taking the time to read this newsletter.  

If this brought something into focus for you or touched an area you have been navigating alone, know that support is available.  When you are ready to explore this work more deeply, you are welcome to reach out.