Expectancy is the single most important number in your trading. It tells you, on average, how much you make (or lose) per trade. If your expectancy is negative, no amount of discipline will save your account. If it’s positive, you have a real edge — and your only job is to protect it.
The Expectancy Formula
Expectancy = (Win Rate × Average Win) - (Loss Rate × Average Loss)
Or equivalently:
Expectancy = (Total Net P&L) ÷ (Total Number of Trades)
Let’s break it down with a real example:
| Metric | Value |
|---|---|
| Total trades | 200 |
| Wins | 110 (55%) |
| Losses | 90 (45%) |
| Average win | $85 |
| Average loss | $70 |
Expectancy = (0.55 × $85) - (0.45 × $70) = $46.75 - $31.50 = +$15.25 per trade
This trader makes $15.25 on average per trade. Over 200 trades, that’s $3,050 in net profit.
Why Expectancy Matters More Than Win Rate
Many traders obsess over win rate. “I win 70% of my trades” sounds impressive — until you learn that their average win is $30 and their average loss is $120.
High win rate, negative expectancy:
(0.70 × $30) - (0.30 × $120) = $21 - $36 = -$15 per trade
This trader wins most of their trades but bleeds money overall.
Low win rate, positive expectancy:
(0.35 × $250) - (0.65 × $80) = $87.50 - $52 = +$35.50 per trade
This trader loses more often than they win, but each win is large enough to compensate — and then some.
The lesson: win rate alone is meaningless without considering the average win and loss sizes. Expectancy captures both.
What’s a Good Expectancy?
There’s no universal “good” number because it depends on your trade frequency and capital:
| Expectancy Per Trade | With 20 Trades/Day | With 5 Trades/Day |
|---|---|---|
| +$5 | $100/day ($2,200/mo) | $25/day ($550/mo) |
| +$15 | $300/day ($6,600/mo) | $75/day ($1,650/mo) |
| +$50 | $1,000/day ($22,000/mo) | $250/day ($5,500/mo) |
A scalper with $5 expectancy who takes 30 trades/day earns $150/day. A swing trader with $50 expectancy who takes 2 trades/day earns $100/day. Both are profitable — through completely different approaches.
How to Calculate Your Expectancy
Method 1: Simple Average
Take your total net P&L over a period and divide by the number of trades:
Your Expectancy = Net P&L ÷ Number of Trades
If you made $4,200 over 300 trades: $4,200 ÷ 300 = +$14 per trade
Method 2: Component Calculation
Calculate win rate, average win, and average loss separately:
- Win Rate = Winning Trades ÷ Total Trades
- Average Win = Sum of All Wins ÷ Number of Wins
- Average Loss = |Sum of All Losses| ÷ Number of Losses
- Expectancy = (Win Rate × Avg Win) - (Loss Rate × Avg Loss)
Method 3: Use TraderDynamiq
Import your trade history and the platform calculates expectancy automatically — overall, by symbol, by hour, by session, and by time period. This lets you see not just your overall expectancy, but where it’s highest and lowest.
Common Expectancy Problems
Problem 1: Negative Expectancy from Fees
Your gross expectancy might be positive, but after fees, it turns negative:
- Gross expectancy: +$8 per trade
- Average fees per trade: -$3.50
- Average funding per trade: -$1.20
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