What expectancy measures
Expectancy is the average amount a strategy makes or loses per trade over many trades. It combines the two numbers traders tend to look at separately: how often they win, and how much they win compared with how much they lose. A positive expectancy means the strategy had an edge on the sample it was measured on; a negative one means more trades only make the losses bigger.
How to use the calculator
Enter your win rate in percent, your average winning trade and your average losing trade in dollars (as a positive number), and the number of trades to project. Use figures from a real journal or a backtest with a meaningful sample — at least 50 to 100 trades. The panel shows the expectancy in dollars and in R (multiples of your average loss), the profit factor, the payoff ratio, the break-even win rate and the expected result over your trade count.
The formulas
expectancy ($) = win rate × avg win − loss rate × avg loss
expectancy (R) = expectancy ($) ÷ avg loss
profit factor = (win rate × avg win) ÷ (loss rate × avg loss)
break-even win rate = avg loss ÷ (avg win + avg loss)
The loss rate is 1 − win rate.
Worked example
A strategy wins 45% of the time, with an average win of $300 and an average loss of $150:
- Expectancy = 0.45 × 300 − 0.55 × 150 = 135 − 82.50 = $52.50 per trade
- In R: 52.50 ÷ 150 = 0.35R
- Profit factor = 135 ÷ 82.50 ≈ 1.64
- Break-even win rate = 150 ÷ 450 ≈ 33.3%
- Over 100 trades: about $5,250, before costs
Now take a strategy with a 60% win rate, an average win of $100 and an average loss of $150. Expectancy = 60 − 60 = $0. Despite winning most of the time it goes nowhere, and trading costs turn it into a loser.
Reading the result
Expectancy is an average, and individual sequences vary widely around it. A strategy with 0.35R expectancy can still lose ten trades in a row — check what that would do to your account with the drawdown calculator. The projection also assumes the future resembles the sample, which markets do not promise.
Common mistakes
- Small samples. Twenty trades can show almost any win rate by luck.
- Leaving out costs. Subtract commission, spread and slippage from the averages, or use net figures from your journal.
- Mixing strategies. Blend two setups and the averages describe neither. Measure each one separately — the trading journal template makes that easier.
- Ignoring changes in position size. If your risk per trade changed during the sample, expectancy in R is more reliable than expectancy in dollars.