JustChartsWhat Is Expectancy in Trading? How to Know if a Strategy Has an Edge
Expectancy is the average profit or loss per trade over many trades: (win rate × average win) − (loss rate × average loss). A positive number means a strategy has an edge; a negative one means it loses money over time no matter how good individual trades look. Measured in R (multiples of the amount risked), it lets you compare strategies directly.
Key facts
- Formula
- (win % × average win) − (loss % × average loss)
- In R-multiples
- (win % × average win R) − loss %
- Positive
- strategy has an edge after enough trades
- Sample size
- at least 30–50 trades, ideally 100+
- Include
- spreads, commissions and swaps
The formula
Expectancy = (win rate × average win) − (loss rate × average loss)
Example 1: high win rate, small wins
Win rate 70%, average win $50, average loss $150: (0.7 × 50) − (0.3 × 150) = 35 − 45 = −$10 per trade. Despite winning most trades, the strategy loses money.
Example 2: low win rate, big wins
Win rate 40%, average win $300, average loss $100: (0.4 × 300) − (0.6 × 100) = 120 − 60 = +$60 per trade.
Expectancy in R
R is the amount you risk on a trade. If you always risk 1R, a win of 2R and a loss of −1R are easy to compare across account sizes:
Expectancy (R) = win rate × average win in R − loss rate × 1
At a 45% win rate with an average win of 2R: 0.45 × 2 − 0.55 × 1 = +0.35R per trade. Over 100 trades risking 1% each, that is roughly +35% before compounding.
How to measure your own expectancy
- Record every trade in a journal: entry, stop, exit, size, result after costs.
- Convert each result into R (profit ÷ initial risk).
- After at least 30–50 trades, average the R values.
- Recheck regularly: markets change, and so can your edge.
Expectancy and risk
Positive expectancy is necessary but not sufficient: you also need position sizing that survives losing streaks — see drawdown and the risk–reward ratio.
Frequently asked questions
What is a good expectancy in trading?
Any reliably positive expectancy after costs is valuable. Many systematic traders consider +0.2R to +0.5R per trade strong, if it holds over a large sample.
Can a strategy with a low win rate be profitable?
Yes. A 35% win rate is profitable if the average win is large enough relative to the average loss — for example 3R wins against 1R losses.
How many trades do I need to measure expectancy?
At least 30–50 to get a rough idea, and 100 or more for more confidence, because short samples are dominated by luck.
Put it into practice
Live charts, an economic calendar and trading calculators — free with a JustCharts account.
See how risk–reward fits inThis article is for education only and is not financial advice. Trading leveraged products carries a high risk of losing money. Contract sizes, trading hours and leverage limits vary by broker and country — always check your own broker’s specifications.