Expectancy is what a trade earns on average, winners and losers combined. Positive, the system makes money on every repetition; negative, trading more only speeds up the loss.
What an average trade earns
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Expectancy answers a simple and decisive question: if I take one more trade, what does it earn on average? It reconciles the two figures usually looked at separately, win rate and the size of gains, into a single number that settles the matter.
That is why a system winning three times out of ten can be excellent: if the three winners each make five times what a loser loses, expectancy is clearly positive. And it is why a system winning nine times out of ten can be ruinous, if the tenth trade erases the other nine.
Expressed in currency, it depends on your position size. Expressed in R, that is in multiples of the risk taken, it becomes portable: it stays true if you double your size, change market, or move from a $2,000 account to a funded one.
Expectancy = net P&L ÷ number of trades or (win rate × average win) − (loss rate × average loss)
Both forms give the same result. The second is more telling because it shows the two levers: how often you win, and by how much.
In risk units: Expectancy in R = (win rate × average winning R) − (loss rate × average losing R). An expectancy of 0.3R means each trade earns on average 30% of the risk committed.
| Expectancy in R | What it means |
|---|---|
| negative | Every trade costs. Trading more deepens the loss; it is not a discipline problem. |
| 0 to 0.1R | The system barely survives its fees. A rise in commissions tips it over. |
| 0.1 to 0.3R | The usual order of magnitude for a system that works and holds up over time. |
| above 0.5R | Rare on a real sample. First check the figure does not rest on a single trade. |
Expectancy is the only figure that tells you what more volume will earn, provided nothing else changes. If it is positive and stable, more trades means more result. If it is negative, the opposite holds, and no amount of discipline will flip the sign.
Read it per setup rather than globally. That is where you find one configuration carrying the whole result while another eats it, and it is the most actionable information a journal can produce: dropping a single setup is sometimes enough to move an account from red to green.
Expectancy = +$23 per trade. With a 38% win rate, so losing almost two times out of three, this system makes $2,300 over 100 trades.
Expectancy is the only statistic you can multiply by a number of trades. At +$23 per trade, a hundred more trades earn about $2,300, provided method and size do not change.
The reverse is just as true and far more important: with negative expectancy, every extra trade deepens the loss, and trading more to win it back is exactly the wrong decision.
Computed per setup, expectancy points at what to keep. One configuration at +0.4R and another at −0.1R can together give a mediocre global expectancy that describes neither.
Dropping the second raises the result without learning anything new, and it is often the fastest improvement a journal allows.
The first flaw is reading it in currency across different sizes. Doubling size doubles expectancy in currency without any skill having moved, and the figure announces progress that does not exist.
The second is the sample that is too short. Over thirty trades, a single unusual result can flip its sign, and expectancy then mostly measures the luck of the period.
The third is expectancy carried by a single trade. The average does not say where it comes from: recomputed without the biggest winner, a positive expectancy sometimes drops below zero.
The classic mistake. Computing it across periods where your position size changed. In currency, doubling size doubles expectancy without any skill having moved. That is why it is read in R as soon as sizing has not stayed constant.
| Indicator | Formula | What it measures | When to use it |
|---|---|---|---|
| Expectancy | net P&L ÷ number of trades | What an average trade earns | Estimating what more volume will earn |
| Profit factor | Σ gains ÷ |Σ losses| | What you earn per $1 lost | Judging a whole system |
| Win rate | winners ÷ total | How often you win | Understanding the psychological comfort |
| R-multiple | result ÷ risk taken | The result in units of risk | Comparing trades of different sizes |
In currency, expectancy follows your position size. In R, it follows your method, and it is the only version that compares month to month when sizing has not stayed constant.
A mediocre global expectancy almost always hides one profitable configuration and another eating it. Cutting the second is faster than improving the first.
Average loss depends on your stops, so on you. Bringing an average loss that is too wide back to your planned risk raises expectancy without touching a single entry.
Expectancy is an average per trade, in currency or in R, so it says what one repetition earns. Profit factor is a ratio of total gains to total losses, so it says what you earn per dollar lost. Both say the same thing differently, but expectancy is the only one you can multiply by the number of trades.
Around a hundred before it stops being an anecdote, several hundred before you size risk on it. Below fifty, a single trade can flip the sign, which means the figure is mostly measuring chance.
No, it only guarantees that repetition is on your side. Over a short run, positive expectancy can still produce a loss, and that is normal. What it guarantees is that with enough repetitions, and a risk that does not blow the account first, the result converges upward.
Through the two levers in the formula, never through willpower. Either you raise the average win, by letting winners run and setting targets on what the market actually offers, or you cut the average loss, by holding your stops. The second lever is almost always the faster one.
Both, for two different questions. In currency, it says what your account actually made per trade. In R, it says what your method is worth regardless of size, and it is the only one that compares month to month when your sizing has changed.
In Tradoshi, Expectancy is shown in currency: net P&L divided by the number of trades, fees included. It has its own card on the Dashboard, marked "per trade", a line in the Track record, and a place in the Reports screen, where you will also find "Average P&L per trade". It is the same number under two labels.
The R version sits alongside: Average realized R in Reports, and the Average R (SL) card on the Dashboard, computed on trades with a recorded stop. Sorting by tag, symbol, entry hour or market session happens in Reports, and that is where expectancy per setup is read.
To go deeper on this: read the full guide. Every term is gathered in the glossary.