What is expectancy in trading?
In one line: Expectancy is the average amount a set of trades made or lost per trade, usually measured in units of risk (R), based on win rate and the size of wins and losses.
The formula
Expectancy = (win rate × average win) − (loss rate × average loss)
Measure wins and losses in units of risk, or R. One R is the amount you risk on a trade. That way the answer works for any account size. See R-multiple.
A simple example
You review 50 practice trades.
- 20 won (40%). The average win was 2R.
- 30 lost (60%). The average loss was 1R.
Expectancy = (0.40 × 2) − (0.60 × 1) = 0.80 − 0.60 = +0.2R per trade.
So across those 50 trades, the average trade gained 0.2 of what was risked. A math example, not a promise. The next 50 trades could look very different.
Check your own numbers with the free expectancy calculator.
Why it matters
Win rate on its own can fool you.
| Win rate | Avg win | Avg loss | Expectancy |
|---|---|---|---|
| 70% | 0.3R | 1R | −0.09R |
| 35% | 2.5R | 1R | +0.225R |
The first set wins most of the time and still shrinks over many trades. The second loses most of the time and still comes out ahead in this example. Expectancy combines both numbers, so you see the whole picture.
A common mistake
Working it out from 8 trades. A small sample swings wildly. A few lucky wins can make expectancy look great; a short losing streak can make it look terrible.
Most traders want at least 50–100 trades before they trust the number. That's why practicing on past charts helps: you can log 100 trades without risking money. See how to backtest a trading strategy.
Track every result in R in your journal. Expectancy then takes one line of math.
Questions
What is a good expectancy in trading?
Anything above 0R means the trades, on average, gained more than they lost. Costs like spreads and commissions should be included, and past results don't guarantee future ones.
Can a strategy with a low win rate have positive expectancy?
Yes, if the average win is big enough compared with the average loss, as in the table above.
Should expectancy include fees?
Yes. Subtract spreads, commissions and slippage from each result, or the number will look better than reality.
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