If you only learn one trading statistic, make it expectancy. It answers the question every trader actually cares about: "On average, how much do I make or lose each time I take this trade?"
The formula
Expectancy = (Win rate × Average win) − (Loss rate × Average loss)
Win rate and loss rate are written as decimals (45% = 0.45), and both "average" numbers are positive.
Example in dollars
Say your breakout setup has these stats over 60 trades:
- Win rate: 45% (so loss rate is 55%)
- Average win: $300
- Average loss: $150
Expectancy = (0.45 × $300) − (0.55 × $150) = $135 − $82.50 = +$52.50 per trade.
Even though you lose more often than you win, every time you take this setup you make $52.50 on average. Over 100 trades that's roughly $5,250, before fees.
Get these numbers calculated for you
VOLERON works out expectancy, profit factor, win rate and drawdown for every setup and session, automatically.
Try VOLERON free for 7 daysExample in R (better)
Dollar expectancy changes when your position size changes. Expectancy in R doesn't, so it's the fairer way to compare setups. R is your result divided by what you risked.
- Win rate: 45%
- Average win: 2R
- Average loss: 1R
Expectancy = (0.45 × 2) − (0.55 × 1) = 0.90 − 0.55 = +0.35R per trade.
So every time you risk $100 on this setup, you expect to make about $35 on average.
Why expectancy beats win rate
| Trader | Win rate | Avg win | Avg loss | Expectancy |
|---|---|---|---|---|
| A | 70% | 0.5R | 1.5R | −0.10R |
| B | 35% | 3R | 1R | +0.40R |
Trader A wins most of the time and still loses money. Trader B loses most of the time and makes money. Win rate alone would have told you the opposite. Read more in win rate vs risk-reward.
How to use expectancy
- Calculate it per setup. Your overall expectancy hides the fact that one setup might be carrying the others.
- Drop or fix negative setups. A setup with negative expectancy over a decent sample is costing you money every time you take it.
- Check it per session. The same setup can be positive in London and negative in New York.
- Watch the sample size. Expectancy from 10 trades is a guess. From 50 or more it starts to mean something.
Related numbers
Expectancy works best alongside profit factor (how much you make per dollar lost) and maximum drawdown (how deep your worst losing run gets). Together they tell you whether an edge is real and whether you can survive trading it.