Expectancy is the average amount of money you can expect to win or lose per trade, based on your historical win rate and average win/loss size. It's the single number that answers the question win rate can't: is this strategy actually profitable, and by how much per trade on average?
The Expectancy Formula
Expectancy = (Win Rate × Average Win) − (Loss Rate × Average Loss)
The result is expressed in your currency or in R-multiples (covered in our guide to R-multiples), and it tells you the average outcome of a single trade if you repeated your current strategy many times over.
A Worked Example
Say your win rate is 40% (loss rate 60%), your average win is $300, and your average loss is $100.
Expectancy = (0.40 × $300) − (0.60 × $100) = $120 − $60 = $60 per trade.
Even though this trader loses more often than they win, every trade is worth $60 on average — over 100 trades, that's a $6,000 expected gain, purely from the math of the edge, before accounting for variance.
Positive vs. Negative Expectancy
A positive expectancy means your strategy makes money on average over a large enough sample of trades — the exact win rate doesn't matter as long as the number is positive. A negative expectancy means the opposite: you will lose money over time no matter how skilled your entries feel in the moment, because the math of your average win versus average loss doesn't support it.
Why Expectancy Matters More Than Win Rate Alone
Two traders can have wildly different win rates and identical expectancy, or identical win rates and completely opposite expectancy. Win rate alone can't tell you which trader is actually profitable — expectancy can, because it accounts for the size of wins and losses, not just how often each occurs. This is exactly the gap covered in why win rate alone is not enough.
How Many Trades Do You Need to Trust Your Expectancy?
Expectancy calculated from 10 trades is mostly noise — a single outsized win or loss can swing the number dramatically. As a rough guide, most traders need at least 30-50 trades under consistent conditions before expectancy starts to reflect a real edge rather than short-term variance.
Expectancy, Calculated From Your Complete History
LedgerPips calculates your expectancy automatically from every synced trade — not a manually maintained log that's missing the sessions you'd rather forget.
Conclusion
Expectancy is the number that turns win rate and average win/loss size into a single, honest answer: is this strategy worth trading? Calculate it from a complete trade history, over a large enough sample, and trust it over gut feeling every time.
