Review · 8 MIN READ
Trading Expectancy: What Your Average Trade Is Really Producing
Combine win rate, average win, and average loss to judge a process beyond its latest outcome.The expectancy equation
Expectancy can be expressed in currency or R: win probability multiplied by average win, minus loss probability multiplied by average loss. A process with 45% wins averaging +2R and 55% losses averaging −1R has expectancy of +0.35R per trade.
This explains why win rate alone is incomplete. A lower win rate can coexist with positive expectancy when winners are sufficiently larger than losses.
Protect the quality of the sample
Expectancy becomes meaningful only when trades are recorded consistently and are reasonably comparable. Mixing unrelated strategies or incomplete results can produce a number that describes nothing useful.
Segment results by strategy and relevant conditions, then compare those segments with enough observations to reduce the influence of one outlier.
Use it as a review signal
Track whether expectancy is supported by repeatable execution. If it depends on one exceptional winner, investigate sensitivity before changing risk. Pair it with drawdown, profit factor, rule adherence, and sample size.
Calculate expectancy in R
Across 20 comparable trades, 9 wins average +2R and 11 losses average −1R.
- Win probability is 9 ÷ 20 = 45%.
- Loss probability is 11 ÷ 20 = 55%.
- Multiply 0.45 × 2R = +0.90R.
- Subtract 0.55 × 1R = 0.55R to get +0.35R expectancy per trade.
The sample produced +0.35R per trade on average. This describes the recorded sample; it does not guarantee the next trade or prove the estimate is stable.
Put the idea into your process
- Reading win rate as expectancy.
- Mixing unrelated strategies into one sample.
- Using average loss as a negative number and subtracting it twice.
- Scaling risk after a small sample or one exceptional winner.
- Calculate expectancy for each strategy before the combined journal.
- Compare the result with and without the largest winner.
- Track sample size beside every expectancy figure.
- Investigate execution or context before changing a strategy rule.
Prompts to use in your journal
- Is expectancy stable across comparable trades?
- How much does the largest winner influence it?
- Which condition is associated with the strongest expectancy?
Real instruments may require contract, tick, pip, currency-conversion, tax, or venue-specific adjustments. TradeNarra does not provide investment advice, recommend trades, or promise outcomes.