Can expectancy be negative?

Yes; then the strategy loses over time.

Is high win rate enough?

No; small wins and large losses can still be negative.

Education · Risk

Trading Expectancy.

Average result per trade. How to calculate trading expectancy, why it matters more than win rate, and how to use it to judge a strategy.

Formula.

Espérance = (taux de réussite × gain moyen) − (taux d'échec × perte moyenne).

Example.

A 40% win rate with an average win of 2R and average loss of 1R: (0.4 × 2) − (0.6 × 1) = 0.2R per trade. Positive, despite losing more often than winning.

Using it.

Measure expectancy in R (multiples of risk) so it is independent of account size. Combine it with position sizing to estimate how many trades a profit target might take.

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