What is Expectancy?
Kutilma (expectancy)
In short
The average result per trade: win rate × average win − (1 − win rate) × average loss.
Expectancy is the average result you can expect from a single trade — the "mathematical value" of a strategy:
- Expectancy = Win rate × Average win − (1 − Win rate) × Average loss
If it is positive, the strategy is expected to come out ahead over many trades and a long period; if it is negative, no amount of discipline will save it.
In R units
It is often more useful to measure expectancy in R (units of initial risk) rather than dollars: E = Win rate × average win (R) − Loss rate × average loss (R). +0.25R means an average profit of a quarter of your risk amount per trade. That makes results easy to compare across account sizes.
Why it matters
Expectancy combines win rate and R:R and answers the question "does this strategy work at all?" Once it is convincingly positive, the next questions are position size and discipline.
Limitations
Expectancy is an average: a single trade, or even 10 trades, can differ sharply from it. It is computed from past data and changes when market conditions change. Remember to subtract commissions and slippage.
1R = $50. Expectancy is +$10 per trade for A, +$5 for B and −$6 for C. The highest win rate (C) is the only losing system. These are averages: real results wobble around them.
Expectancy = WR × 5.0 − (1 − WR) × 4.5. Because wins and losses are almost equal in size, a few points less win rate pushes the result toward zero. Fees and slippage are not included.
Example
An illustrative history: 100 trades, win rate 45%, average win $180, average loss $100.
- 0.45 × $180 = $81.
- 0.55 × $100 = $55.
- Expectancy: $81 − $55 = +$26 per trade.
- With $2 commission per trade: +$24.
In R: with $100 risk the average win is 1.8R → 0.45 × 1.8 − 0.55 × 1 = 0.81 − 0.55 = +0.26R. Over 100 trades that is roughly +26R, but there will be losing streaks along the way — it is an average, not a guarantee.
Mistakes and tips
Calculate expectancy only from real results in your trading journal, not from rough guesses.
Don't draw firm conclusions about expectancy until you have at least 30–50 trades.
Calculate expectancy per setup — a positive overall number can hide a losing setup inside it.
Calculate it
Frequently asked questions
- How do you calculate trading expectancy?
- Multiply the win rate by the average win and subtract the loss rate multiplied by the average loss. The result is the average profit or loss you can expect per trade.
- Does positive expectancy guarantee profit?
- No. It is an average over many trades and is based on the past; over short periods or when the market changes, results can be different.
Learn it in the Academy
This term is covered with hands-on examples and a quiz in these lessons of the interactive course.
- R:R — risk/reward ratioR units, the win rate you need, expectancy and profit factor with numbers; how partial exits change R and how to set realistic targets.Open lesson · 11 min
- Demo trading: practice without money, but seriouslyMaking demo realistic, a 30-day plan, which numbers to track and when to move to real money.Open lesson · 11 min
- Trading journal: learning from your own statisticsWhat to record, tagging setups, computing win rate, expectancy and profit factor, and finding where the money leaks out.Open lesson · 12 min
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