The average dollar (or R) amount you can expect to make per trade over many trades — the math behind whether a strategy works.
Expectancy tells you how much money you make on AVERAGE per trade, accounting for both your wins and your losses. The formula is: (win rate × average win) − (loss rate × average loss). A positive expectancy means the strategy is profitable in the long run. A negative expectancy means it loses money no matter how disciplined you are.
Expectancy is the most important metric in trading. A strategy with 40% win rate and 3:1 reward-to-risk has positive expectancy: (0.4 × 3) − (0.6 × 1) = 0.6R per trade. A strategy with 70% win rate and 1:2 reward-to-risk has negative expectancy: (0.7 × 0.5) − (0.3 × 1) = 0.05R per trade. Win rate without R-multiple is meaningless.
Expectancy is also why tiny edges scale. A strategy with +0.2R expectancy that you trade 200 times a year delivers +40R per year. With 1% risk per trade, that's 40% returns annually.
Real trade example
Most professional discretionary forex traders run strategies with 40-50% win rates and 2-3R average winners. The expectancy works out to 0.3-0.5R per trade — small but consistent, and at scale it compounds into serious returns.
Frequently asked about expectancy
What is an expectancy in trading?+
The average dollar (or R) amount you can expect to make per trade over many trades — the math behind whether a strategy works.
When will I see expectancy used in real trading?+
On every serious trading journal, every strategy backtest, and every prop firm evaluation. Expectancy is the pass-fail line for any strategy.
What is the most common mistake traders make with expectancy?+
Chasing high win rates without checking expectancy. A 90% win rate with tiny wins and huge losers can have NEGATIVE expectancy. Always do the math before judging a strategy.
What do experienced traders know about expectancy that beginners don't?+
Track expectancy in R-multiples, not dollars. R-multiples normalize for size and let you see the strategy's true edge. "My system has +0.4R expectancy" is meaningful regardless of account size.