Expectancy
Expectancy is the average result per trade over many trades, combining win rate with the size of wins and losses. Positive expectancy is the sign of a strategy that works.
How it works
Formula: expectancy = win rate × average win − (1 − win rate) × average loss. It is handy to measure it in R, where 1R is the risk on one trade. Then expectancy tells you how many R an average trade earns.
If expectancy is negative, no money management will make the strategy profitable: the more you trade, the more you lose. If it is positive, the strategy makes money over time, but single trades and even whole weeks can still lose.
Do not forget fees, spread and slippage: a strategy at +0.05R before costs easily turns negative after them. Calculate expectancy from your trade journal or a backtest, and the more trades in the sample, the more reliable the number.
Win rate 40%, average win $300, average loss $100. Expectancy = 0.4 × 300 − 0.6 × 100 = 120 − 60 = $60 per trade. In R: 0.4 × 3 − 0.6 × 1 = +0.6R. Over 100 trades that averages about +$6,000, even though 60 of them lose.
The mistake is judging a strategy by the last few trades: three losses in a row do not prove negative expectancy, and three wins do not prove the opposite. Collect at least 50–100 trades under the same rules, calculate expectancy after fees, and only then draw conclusions.
Questions and answers
What is expectancy in trading in simple terms?
It is how much one trade earns or loses on average if you repeat the strategy many times.
How do you calculate expectancy?
Multiply win rate by average win and subtract the loss rate times average loss. A result above zero means the strategy is profitable over time.
Can a low win rate strategy have positive expectancy?
Yes, if winners are much larger than losers. At a 30% win rate with wins three times the size of losses, expectancy is positive.
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Updated: 2026-10-19