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 tak