Expectancy is the average amount you can expect to win or lose per trade over many trades. The formula is (win% × average win) − (loss% × average loss). In R-multiples it becomes one clean number. Positive means you have an edge. Negative means the strategy loses money, however good individual trades feel.
What expectancy is
Any single trade is mostly noise. You can do everything right and lose. Expectancy looks past the noise and asks what the average trade returns across a large number of trades. That average, not any individual outcome, is what grows or shrinks an account.
A method with positive expectancy makes money if you repeat it enough times. A method with negative expectancy loses, however exciting its winners look.
The formula
Expectancy per trade is (win rate × average win) − (loss rate × average loss).
Say you win 40% of trades, your average win is $200 and your average loss is $100. Expectancy = (0.40 × 200) − (0.60 × 100) = 80 − 60 = +$20 per trade. Over 500 trades that is roughly $10,000 of edge, independent of any single result.
Expectancy in R
Dollars depend on size, so professionals express expectancy in R. If your average win is 2R and your average loss is 1R at a 40% win rate, expectancy = (0.40 × 2) − (0.60 × 1) = 0.8 − 0.6 = +0.2R per trade.
Now the number is portable. +0.2R means you make, on average, one fifth of your risk per trade, whatever the account size. Multiply by the number of trades and your risk per trade for a realistic picture of returns.
Why it beats win rate
Win rate on its own is a vanity metric. A 90% win rate is a losing strategy if the occasional loss is ten times the size of each win. A 35% win rate is a great strategy if winners are three times the losers. Expectancy exposes this because it weighs frequency and size together.
Chasing a high win rate often quietly destroys expectancy. Traders cut winners early and let losers run to be right. The goal was never to be right often. It was to be net positive.
How to improve it
There are only three levers: raise the win rate, raise the average win, or cut the average loss. The most reliable is the last. Keep losses at or below 1R by honouring your stop. It is fully within your control, while win rate is not.
Letting winners reach their targets and refusing to let losers exceed 1R does more for most traders than any new setup. Small, consistent improvements to average loss compound hard over hundreds of trades.
Measuring your own
Record every trade's R result in a journal, then average them. The mean R is your expectancy. A sample of at least 30-50 trades starts to be meaningful. A handful tells you nothing.
The free calculators on this site let you stress-test an expectancy against realistic losing streaks. Know your number, trade it consistently, and let the sample size do the work.
Questions
What is a good expectancy?
Any positive expectancy is an edge. Even +0.2R per trade compounds meaningfully over hundreds of trades. Being reliably positive on a large enough sample matters more than the number.
How many trades do I need?
At least 30 to 50 before the average becomes meaningful. A handful of trades is dominated by luck.
70–80% of retail investor accounts lose money trading CFDs. This page is education, not advice. All trade examples are constructed composites.
