About this guide: Expectancy is standard financial math. The worked examples use hypothetical numbers for illustration — your actual expectancy depends on your trade data. Assessment ranges are practical guidelines, not universal standards. See our editorial methodology.
The Formula
Expectancy = (Win Rate × Average Win) - (Loss Rate × Average Loss)
Where Loss Rate = 1 - Win Rate
That's it. Four numbers, one calculation (see expected value on Investopedia). The result tells you your expected profit (or loss) per trade, averaged across all trades.
Worked Examples
Example 1: The Typical Day Trader
| Metric | Value |
|---|---|
| Win rate | 52% |
| Average winning trade | +$120 |
| Average losing trade | -$90 |
Expectancy = (0.52 × $120) - (0.48 × $90) = $62.40 - $43.20 = +$19.20 per trade
This trader makes $19.20 on average every time they enter a trade. Over 100 trades per month, that's $1,920 in expected profit. Not exciting per trade — but compounded over volume, it's a real income.
Example 2: The Trend Follower (Low Win Rate, High R:R)
| Metric | Value |
|---|---|
| Win rate | 35% |
| Average winning trade | +$340 |
| Average losing trade | -$95 |
Expectancy = (0.35 × $340) - (0.65 × $95) = $119.00 - $61.75 = +$57.25 per trade
Higher expectancy per trade despite a 35% win rate. The massive R:R compensates. This trader loses most of the time but makes money overall because winners are 3.6x losers. Psychologically brutal, mathematically sound.
Example 3: The High Win Rate Scalper
| Metric | Value |
|---|---|
| Win rate | 72% |
| Average winning trade | +$35 |
| Average losing trade | -$85 |
Expectancy = (0.72 × $35) - (0.28 × $85) = $25.20 - $23.80 = +$1.40 per trade
72% win rate! Sounds great — but expectancy is only $1.40 per trade. After commissions ($3-5 per round trip), this trader is actually losing money. The high win rate masks a fundamental problem: losses are 2.4x winners. This is the most common trap in scalping.
Example 4: The Losing Trader Who Doesn't Know It
| Metric | Value |
|---|---|
| Win rate | 55% |
| Average winning trade | +$65 |
| Average losing trade | -$95 |
Expectancy = (0.55 × $65) - (0.45 × $95) = $35.75 - $42.75 = -$7.00 per trade
55% win rate — most traders would feel good about this. But the average loss is 46% bigger than the average win. Every trade costs $7 on average. Over 100 trades, that's -$700. This trader "wins more than they lose" and still bleeds money. Without measuring expectancy, they might never realize it.
Expectancy in R-Multiples
Calculating in dollars is useful but account-size dependent. Expressing expectancy in R (where 1R = your risk per trade) normalizes across account sizes — a concept popularized by Van Tharp's position sizing work:
Expectancy (R) = (Win Rate × Avg Win in R) - (Loss Rate × Avg Loss in R)
Since avg loss ≈ 1R by definition: Expectancy (R) = (Win Rate × Avg R-Multiple) - (Loss Rate × 1)
For Example 1: Use the position calculator to keep your R consistent. If $120 wins = 1.33R and $90 losses = 1R:
Expectancy = (0.52 × 1.33) - (0.48 × 1.0) = 0.69 - 0.48 = +0.21R per trade
This means for every $100 risked, expected return is $21. Works for a $1,000 account risking $10 or a $100,000 account risking $1,000.
What Your Expectancy Number Actually Tells You
| Expectancy (per trade) | Assessment | Implication |
|---|---|---|
| Negative | Losing edge | More trading = more losses. Stop and fix the strategy. |
| $0 to +$5 | Marginal | Commissions and slippage likely eat this. Essentially break-even. |
| +$5 to +$20 | Functional | Real edge. Needs volume to generate meaningful income. |
| +$20 to +$50 | Solid | Strong edge. 50-100 trades/month produces real returns. |
| +$50+ | Excellent | Large per-trade edge. Either large account, great strategy, or small sample (verify). |
The key insight: expectancy is usually small. Most profitable traders make $10-30 per trade. The money comes from taking hundreds of trades with that small edge — not from individual home runs. This is why overtrading is so dangerous: adding trades with zero or negative expectancy dilutes the ones that work.
Expectancy by Setup, Session, and Day
Your overall expectancy is an average. Underneath it, different setups, sessions, and days have wildly different expectancies.
A typical breakdown might look like:
| Filter | Expectancy | Trades | Action |
|---|---|---|---|
| Setup: BOS + FVG | +$42 | 85 | A-grade — trade more of this |
| Setup: Range breakout | +$8 | 65 | Marginal — tighten criteria or drop |
| Setup: Revenge trades | -$35 | 30 | Negative — eliminate completely |
| Session: London | +$28 | 110 | Your best session — focus here |
| Session: Late NY | -$12 | 40 | Negative — stop trading after 3pm |
| Day: Friday | -$18 | 35 | Negative — cap or skip Fridays |
This is where expectancy becomes actionable. Your overall +$19 per trade hides the fact that BOS+FVG setups during London are +$42 while revenge trades on Friday are -$35. Cutting the negative and growing the positive is how you go from +$19 to +$35 per trade without changing your strategy.
TSB calculates expectancy automatically — overall and broken down by setup, session, day of week, and instrument. The Edge Score combines expectancy with win rate and profit factor into a single grade. No formulas, no spreadsheets — import your trades and see the number. Check your expectancy →
Common Expectancy Mistakes
- Ignoring commissions. Calculate expectancy AFTER all costs. A +$5 expectancy becomes -$2 after $7 in round-trip commissions. Always use net numbers.
- Small sample size. Expectancy from 20 trades is noise. Wait for 60+ minimum, 200+ for real confidence. See backtesting guide.
- Mixing strategies. Combining two strategies into one expectancy number hides the fact that one might be positive and the other negative. Calculate per strategy.
- Assuming it's fixed. Expectancy changes with market conditions. A +$30 expectancy in trending markets might be -$10 in choppy markets. Monitor monthly.
- Optimizing for expectancy alone. +$100 per trade means nothing if you can only take 3 trades per month. Expectancy × trade frequency = total income. Both matter.
The Bottom Line
Expectancy reveals what your raw P&L doesn't make obvious. It smooths out streaks and outliers to give you the average value of every trade you take — though it still needs a decent sample size to be reliable.
If the number is positive — protect it, filter for the best setups, and take volume. If it's negative — seriously reconsider that strategy, because more trades only dig the hole deeper.
Four numbers. One formula. A clearer picture of whether your trading has a repeatable edge.
Related reading: Profit factor benchmarks · What is a good profit factor? · Win rate vs risk-reward · Weekly trading review
