The trade expectancy formula
Expectancy answers the only question that matters about a strategy: on average, how much does it make per trade? Get it positive and keep it positive, and profit is just a matter of enough trades.
The formula
Expectancy = (win rate × average win) − (loss rate × average loss)
Or in R-multiples: expectancy = your average R per trade.
A worked example
Say you win 45% of trades, your average win is $300, and your average loss is $150:
(0.45 × $300) − (0.55 × $150) = $135 − $82.50 = +$52.50 per trade.
Over 200 trades that's ~$10,500 of expected profit — from a sub-50% win rate, because the winners are twice the losers.
The takeaway
Win rate alone is a vanity metric. Expectancy ties win rate and win/loss size into one number you can actually optimize — and a journal that tracks it by setup tells you which strategies to scale and which to cut.
Run your own numbers:
Trade expectancy calculatorFrequently asked questions
What is trade expectancy?
Expectancy is the average amount you can expect to win (or lose) per trade over a large sample. Positive expectancy means the strategy makes money over time; negative means it bleeds, no matter how good any single trade feels.
What is the expectancy formula?
Expectancy = (win rate × average win) − (loss rate × average loss). Expressed in R: expectancy = average R-multiple across all trades. Both say the same thing — your edge per trade.
Can you have a low win rate and still be profitable?
Yes. A 40% win rate with average wins three times the size of average losses has strongly positive expectancy. Win rate alone tells you nothing about profitability without the win/loss size ratio.
How do I improve my expectancy?
Raise your average win relative to your average loss (let winners run, cut losers at the stop), improve win rate via better setup selection, and cut trades with negative expectancy. Journaling by setup shows you which ones to keep.