How to use the expectancy calculator
- Choose the unit. Measure results in a currency, or in R if you know your averages in units of risk.
- Enter your win rate as a percentage of trades that finish in profit.
- Enter your average win and your average loss. Write the loss as a positive number.
- Set the number of trades to project, up to 1,000.
You get the expectancy per trade, the payoff ratio, the profit factor, the win rate you need to break even and the chance of being behind after the trades you chose. Two charts show what that many trades add up to, and the path your equity might take with bands for how far luck can carry it either way.
The expectancy formula
expectancy = (win rate × average win) − (loss rate × average loss)
The loss rate is one minus the win rate. The result is the average amount a trade makes, so a positive figure is an edge and a negative one is a cost. Dividing by the average loss gives the same figure in R, the unit that lets you compare systems that risk different amounts.
Two related measures come from the same inputs:
- Payoff ratio is average win divided by average loss.
- Profit factor is gross wins divided by gross losses, which equals win rate × average win ÷ (loss rate × average loss).
Worked example
A strategy wins 40% of its trades, the average win is $300 and the average loss is $100.
The strategy loses six trades in ten and still makes money, because the wins are three times the size of the losses. These are the numbers the calculator opens with. Winning only 40% of the time, it needs a payoff above 1.5 to break even; at 3 it has a wide margin.
Why the average hides the spread
Expectancy is a long-run average. Over any set of trades the real result varies around it, and that variation is large when the trades are few. The standard deviation of one trade in the example is about $196, more than three times the expectancy. After 100 trades the expected profit is $6,000 with a standard deviation of about $1,960, so a run well below or above it is normal.
The projection chart shows this: the bold line is the expected path, the bands hold roughly two thirds and 95% of runs, and the grey lines are twelve simulated runs of the same system. Some of them sit below zero for a long time before turning up. If you judge a system on its first twenty trades, you may drop a good one or keep a bad one. The sample size entry explains how many trades you need.
Which numbers to trust
- Win rate alone says nothing. A 70% win rate with an average loss four times the average win loses money.
- Payoff alone says nothing. A payoff of 5 with a 10% win rate is below break-even.
- Profit factor is useful but ignores how many trades produced it. A factor of 3 over 15 trades is weaker evidence than 1.5 over 500.
- Expectancy in R is the cleanest number because it holds whatever size you traded.
Use your real averages from a journal, after costs, from the setups you actually take. Guessed inputs give guessed answers. The article on win rate, profit factor, expectancy and R-multiple shows how they fit together, and the risk of ruin calculator shows what a given edge survives.
Common expectancy mistakes
- Ignoring costs. A small edge before commission and slippage can be negative after them.
- Mixing setups. A blended average can hide one setup that makes money and another that loses it.
- Using too few trades. Averages from a dozen trades are not stable.
- Using planned numbers. Plan a 1:3 target and your real average win may be far smaller.
- Reading expectancy as a promise. It is an average over many trades, not a forecast for the next one.
What the calculator does not know
The projection treats every trade as independent and every win and every loss as the same size. Real trades vary in size and can cluster in streaks and regimes, so real runs spread wider than the bands. The calculator does not know about costs, so enter averages after commission and slippage. Nothing here is investment advice.
Frequently asked questions
What is expectancy in trading?
Expectancy is the average amount you make or lose per trade over many trades. It combines how often you win with how much you win and lose. A positive expectancy means the system has an edge.
How do I calculate trading expectancy?
Multiply your win rate by your average win, then subtract your loss rate multiplied by your average loss. With a 40% win rate, a $300 average win and a $100 average loss, the expectancy is 0.40 × $300 − 0.60 × $100 = $60 per trade.
What is a good expectancy?
Any consistent figure above zero after costs is an edge. In R terms, 0.2R to 0.5R per trade is common among systematic traders. Read it together with the number of trades behind it and the size of your drawdowns.
What is the difference between expectancy and profit factor?
Expectancy is the average result of one trade. Profit factor is the ratio of everything you won to everything you lost. A profit factor above 1 means the system made money, and expectancy tells you how much per trade.
What is a good profit factor?
Above 1 is profitable. Many traders look for 1.5 or more over a meaningful sample, but a very high factor over a handful of trades says little.
How many trades do I need for expectancy to be reliable?
At least 100 for a rough picture and several hundred for a firm one. The calculator's projection shows how wide the spread of outcomes is for the number of trades you choose.
Why can a strategy with a 40% win rate be profitable?
Because the wins can be larger than the losses. At a payoff ratio of 3, a 40% win rate gives a profit factor of 2 and an expectancy of 0.6R per trade.
Should I use money or R in the calculator?
R is better for comparing systems and for sizing, because it removes the amount you risked. Money is more direct if you always risk about the same amount.