The average amount you expect to win or lose per trade over a large number of trades.
Expectancy combines your win rate and your average reward-to-risk ratio into a single number. The formula is: Expectancy = (Win Rate × Average R) – (Loss Rate × 1). A positive expectancy means your system makes money over time. A negative expectancy means it loses money regardless of how you feel about individual trades.
Expectancy is the single most important metric for evaluating a trading strategy. It tells you whether your edge is real and quantifiable. Two traders with identical win rates can have vastly different results if their R values differ. Expectancy captures both dimensions.
You win 50% of your trades with an average R of 2. Expectancy = (0.50 × 2) – (0.50 × 1) = 0.50R. On average, you gain 0.50R per trade. Over 100 trades risking $100 each, that’s $5,000 in profit.
With a 50% win rate and 2R average reward, expectancy is +0.5R per trade — a profitable system despite losing half the time.