How to calculate expectancy in trading
Expectancy is your average expected profit per trade. Formula: (Win% x Average Win) - (Loss% x Average Loss). Positive expectancy means the strategy makes money over a large sample.
The expectancy formula
Expectancy = (Win Rate x Average Win) - (Loss Rate x Average Loss). Win Rate and Loss Rate are decimals (0.55, 0.45). Average Win and Average Loss are absolute dollar (or R) values.
Expectancy = (W% x AvgWin) - (L% x AvgLoss)
Worked example
Say you win 45% of trades. Your average win is $220 and your average loss is $130. Expectancy = (0.45 x 220) - (0.55 x 130) = 99 - 71.5 = $27.50 per trade. Over 200 trades that is $5,500 in expected profit.
Why expectancy beats win rate
A 40% win rate strategy with a 3R average win and 1R average loss is more profitable than a 70% win rate that pays 1R and loses 2R. Expectancy captures both hit rate and payoff in one number, which is why every serious journal reports it.
Sample size matters
Expectancy is only meaningful after 30+ trades and stable after 100+. Below that, one outlier trade skews the number. A trading journal that auto-calculates expectancy from every logged trade removes the guesswork.
Frequently asked
What is a good expectancy?
Any positive value is profitable. Discretionary day traders often target 0.2R to 0.5R per trade after fees.
Should I use dollars or R multiples?
R multiples (multiples of your risk per trade) normalize across position sizes and are more comparable over time.
How does TradeStack calculate it?
TradeStack computes expectancy automatically from your logged trades and shows it alongside win rate and profit factor.
Keep reading
TradeStack is a free trading journal. Drop in a CSV and get win rate, profit factor and expectancy automatically.
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