Risk & Money Management
Intermediate
Expectancy
Also called: per-trade expectancy
The average profit per trade, computed from win rate and average win/loss size.
Definition
Expectancy tells you what to expect from one average trade, in either dollars or R. Positive expectancy = profitable system over time; negative = you’re paying to gamble.
A 40% win rate with 3:1 R:R has expectancy of +0.6R per trade — better than a 70% win rate with 0.5:1 R:R (+0.05R per trade).
Example
50% win rate, average win $200, average loss $100. Expectancy = (0.5 × 200) − (0.5 × 100) = +$50 per trade.
Formula
Expectancy = (Win% × Avg Win) − (Loss% × Avg Loss)