Risk Management5 min read

Expectancy: What Your Strategy Earns Per Trade

Quick answer

One number that tells you whether a strategy makes money — and settles the win-rate argument for good.

Expectancy is what one trade is worth on average once wins and losses are weighted by how often they happen. It is the only honest summary of a strategy, because it cannot be flattered by a good week.

It also ends the win-rate debate. A strategy that loses seven trades out of ten can be excellent, and one that wins seven out of ten can be a slow way to lose money.

The formula

Expectancy = (win rate × average win) − (loss rate × average loss).

Use money, not percentages, and use your own closed trades rather than backtest hopes. Any result above zero means the system earns over a large sample; below zero means position sizing only decides how fast the account bleeds.

Win rate = winning trades ÷ total trades
Average win = total profit from winners ÷ number of winners
Average loss = total loss from losers ÷ number of losers
Needs a meaningful sample — under about 30 trades the number is noise

Worked example

Strategy A wins 30% of the time, making $900 on winners and losing $250 on losers: (0.30 × 900) − (0.70 × 250) = $270 − $175 = $95 per trade.

Strategy B wins 70% of the time, making $200 on winners and losing $500 on losers: (0.70 × 200) − (0.30 × 500) = $140 − $150 = −$10 per trade. Strategy B feels far better to trade and loses money anyway.

Expectancy in R instead of dollars

Expressing results in R — multiples of the amount you risked — makes expectancy comparable across account sizes and instruments. A trade risking $50 that returns $150 is +3R regardless of the balance.

Average R per trade multiplied by the number of trades you take per month gives a realistic monthly expectation, which is the number to use when judging whether a target is achievable rather than aspirational.

Using it on a funded account

Expectancy tells you how much trading you need, not just how well you trade. A +0.15R average over twenty trades a month is a healthy result; expecting it to clear a target in five trades is not.

It also flags rule risk. If your expectancy depends on a handful of outsized winners, a consistency rule or a tight daily limit can quietly break the strategy even while the maths looks fine, so check both together.

Frequently asked questions

What is a good expectancy?

Any positive number is workable; what matters is size relative to your risk. An average of +0.1R to +0.3R per trade is a realistic, durable range for discretionary traders. Figures far above that on a small sample usually reflect luck or an untested market condition.

Is expectancy the same as profit factor?

They are related but different. Profit factor is gross profit divided by gross loss — a ratio. Expectancy is the average money or R per trade, so it also reflects how often you trade and is easier to convert into a monthly expectation.

How many trades do I need before I trust it?

At least 30 closed trades for a rough read and closer to 100 for confidence, all from the same strategy and market conditions. Mixing strategies into one sample produces a number that describes nothing.

Trade it on a funded account

MixFunded evaluations start from $5. Rewards are processed every Monday in USDT (TRC-20) and published on-chain.

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