Expectancy
Expectancy is the average result expected per trade. It answers whether a strategy makes money over time — something win rate alone never answers. Run this calculation now: how to measure your own performance
The formula
Expectancy = (win rate × average win) − (loss rate × average loss). With a 40% win rate, average win of 300 and average loss of 100: (0.40 × 300) − (0.60 × 100) = 120 − 60 = 60. Each trade is worth 60 on average, while losing six out of ten.
The reverse is true and crueller: an 80% win rate with a 50 average win and a 400 average loss gives (0.8 × 50) − (0.2 × 400) = 40 − 80 = −40. A strategy that is nearly always right and always loses money.
Using it in practice
Expectancy is only meaningful with a sample: below 30 to 50 trades the number swings too much to decide anything. Break it down by instrument, by session and by setup — the overall average hides the fact that one setup carries the rest.
Expectancy in points, multiplied by the number of trades in a month, gives a realistic monthly projection. That figure, not the target you wish for, is what should size the risk per trade.