The formula
Expectancy is the average result per trade. It weighs the average win by how often trades win, and the average loss by how often they lose:
expectancy = (win rate × average win) − (loss rate × average loss)
The loss rate is 100% minus the win rate. Enter the averages in money or in R; the expectancy comes out in the same unit.
A worked example
45 trades in every 100 win, the average win is 300.00 and the average loss is 150.00:
- Wins add
- 45% × 300.00 = 135.00
- Losses take
- 55% × 150.00 = 82.50
- Expectancy
- 135.00 − 82.50 = +52.50
The same win rate with the averages in R, a 2R win against a 1R loss:
- Wins add
- 45% × 2.00 = 0.90
- Losses take
- 55% × 1.00 = 0.55
- Expectancy
- 0.90 − 0.55 = +0.35
That is +0.35R per trade.
Reading the result
- Above zero: across the trades the averages came from, the average trade made money.
- Below zero: the average trade lost money.
- Zero: the wins and the losses cancelled out. The breakeven win rate calculator finds the win rate where that happens.
Expectancy describes the trades the averages came from. It does not say what the next trade will do, and an average of a few trades can change a lot with one more.
What it leaves out
- Breakeven trades. The calculator counts every trade as a win or a loss. If some of yours broke even, work the win rate out from wins and losses only; the result is then the average per trade that won or lost.
- Fees. Use averages after commission for an expectancy after fees.
- The spread behind the averages. One very large win can carry an average that most trades never came near.
- Everything but your numbers. It is plain arithmetic on what you type. It does not know your trades or the market, and it is not advice.
To measure a single trade in units of its risk, use the r-multiple calculator.