Subtle & customizable audible cues to indicate when charts turnover, plus world clocks for any market — by & for professional traders
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Subtle & customizable audible cues to indicate when charts turnover, plus world clocks for any market — by & for professional traders
Open the appGuidance last reviewed 2026-08-18
Win rate on its own tells you almost nothing. A trader who wins 80% of the time can lose money steadily. A trader who wins 35% of the time can do very well. Expectancy is the number that resolves the contradiction, because it accounts for how much the wins and losses were worth, not just how often each happened.
Expectancy is what one average trade is worth to you. Positive means the average trade makes money. Negative means it does not, however good any individual week looked.
Expectancy = (Win rate × Average win) − (Loss rate × Average loss)
That is the whole thing. Win rate and loss rate are fractions that add to 1. The result comes out in whatever currency your trades are in.
Two traders, one hundred trades each, and the one with the worse win rate comes out ahead.
| Trader A | Trader B | |
|---|---|---|
| Win rate | 70% | 40% |
| Average win | $100 | $400 |
| Average loss | $300 | $150 |
| Expectancy | (0.70 × 100) − (0.30 × 300) = −$20 | (0.40 × 400) − (0.60 × 150) = +$70 |
Trader A wins far more often and loses money on average. Trader B is wrong most of the time and does not. This is the single most common misunderstanding in retail trading, and it takes one subtraction to see.
Many traders express expectancy in R, multiples of the amount risked, rather than in currency. The idea was popularized by Van Tharp and it is the version most journals report.
R is your initial risk on a trade. If you risk $200 and make $400, that is +2R. Risk $200 and lose it all, that is −1R. Cut it early for a $100 loss and that is −0.5R.
Expectancy in R is then simply the average R across all your trades. And it reads more usefully than a currency figure:
An expectancy of +0.35R means that for every $1 you put at risk, you got $1.35 back on average.
Why this is better than currency. It makes trades of different sizes comparable. A $50 position and a $5,000 position sit in the same average without the big one drowning out the small one — and it survives you changing account size, which a dollar figure does not.
The cost is one extra field: you have to record your intended stop at the moment of entry. Reconstructed afterwards, it is a guess.
A high expectancy on a system that trades twice a year is worth less than a modest one that trades daily. Van Tharp's term for the combination is expectunity — expectancy multiplied by opportunity.
Expectancy × number of trades in a period = what the system is actually worth over that period
| System A | System B | |
|---|---|---|
| Expectancy | +0.8R | +0.2R |
| Trades per month | 3 | 40 |
| Expected R per month | +2.4R | +8R |
System A looks four times better on the headline number and earns a third as much. Whenever two strategies are being compared, frequency belongs in the comparison.
⚠️ The obvious trap on the other side: trading more only helps while the edge survives the extra trades. Forcing marginal setups to raise frequency usually lowers expectancy faster than it raises opportunity.
There is no magic threshold, and the honest answer is it depends on how spread out your results are. A strategy with tight, similar outcomes settles quickly. One that depends on rare large winners needs far more trades before the average means anything, because the whole result lives in the tail.
That said, the conventions in common use are a reasonable starting point:
| Trades | What the number is worth |
|---|---|
| Under 30 | Indicative at best. One outlier can move it entirely |
| 30–100 | A rough estimate. Useful for spotting a badly negative system |
| 100+ | Meaningful for a consistent strategy |
| Several hundred, across different conditions | What you would want before making a decision that matters |
⚠️ And trades in one market regime are not a sample of all regimes. Two hundred trades taken entirely in a rising market says little about the same strategy in a falling one.
It is an average, not a prediction. A positive expectancy says nothing about the next trade or the next ten. Losing streaks are entirely compatible with a positive expectancy, and long ones are more likely than most people expect.
It hides changes over time. A single figure covering two years can mask an edge that stopped working six months ago. Expectancy over a rolling window — the last twenty or fifty trades — shows drift that the lifetime number smooths away.
It ignores costs unless you include them. Commissions, fees and slippage come straight out of expectancy. A strategy that looks marginally positive gross can be negative net, and the gap is usually wider than people assume.
It says nothing about the path. Two systems with identical expectancy can have wildly different drawdowns along the way. One of them is tradeable and one of them is not.
It can be dominated by one trade. If a single outlier is carrying the average, the number describes that trade rather than the strategy. Worth checking what expectancy looks like with the best result removed.
| Term | Meaning |
|---|---|
| Expectancy | The average result of one trade, in currency or in R |
| R | Your initial risk on a trade — the distance from entry to your planned stop, times position size |
| R-multiple | Any trade result expressed in units of R. +2R means twice what you risked |
| Opportunity | How often the strategy produces a trade |
| Expectunity | Expectancy × opportunity. What the system is worth over a period rather than per trade |
| Win rate | The share of trades that closed profitable. On its own, close to meaningless |
| Profit factor | Gross wins ÷ gross losses. A quick health check on the same data |
| Measure | What it adds |
|---|---|
| Expectancy | What one average trade is worth |
| Profit factor | Gross wins ÷ gross losses. Quick and unitless |
| Win/loss ratio | Average win ÷ average loss, with frequency stripped out |
| K-ratio | Whether the growth was steady or arrived in lumps |
| Maximum drawdown | The worst peak-to-trough fall along the way |
| System Quality Number | Expectancy adjusted for consistency and sample size |
Expectancy is the one to start with. It is the only one of these that answers the question a trader actually asks first — is this working?
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