What Is Expectancy in Trading?
Expectancy is the average amount you can expect to win or lose per trade over many trades, given your win rate and your average win and loss. Here is the formula and why it matters more than win rate. Educational, not financial advice.
Expectancy is the average amount you can expect to win or lose per trade over many trades, given your win rate and your average win and loss. It tells you whether a strategy makes money on average — a positive expectancy is profitable over time, a negative one loses. Educational, not financial advice.
The formula
Expectancy = (win rate × average win) minus (loss rate × average loss).
Example: you win 40% of trades with an average win of $200, and lose 60% with an average loss of $100. Expectancy = (0.40 × $200) minus (0.60 × $100) = $80 minus $60 = $20 per trade on average. Our trading expectancy calculator works this out for you.
Why win rate alone is misleading
A 40% win rate can be very profitable with a strong risk-reward ratio; a 70% win rate can still lose money if the losers are large. Expectancy combines win rate and the size of wins versus losses into one number, which is why it is the honest measure of an edge.
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Positive vs negative expectancy
| Expectancy | Meaning |
|---|---|
| Positive | Makes money on average over many trades |
| Zero | Break-even before costs |
| Negative | Loses money on average |
Do not forget costs
Subtract spread, commission and slippage — they turn a marginal edge negative. A strategy that looks positive on paper can be negative once real costs are included.
Takeaway
Expectancy is your average result per trade, combining win rate with the size of wins and losses. Aim for a positive number after costs, and remember: a high win rate means nothing on its own.
Educational only — not financial advice; trading carries a real risk of loss.
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Educational content only — not financial advice. Trading involves substantial risk of loss and is not suitable for everyone.