Expectancy: the number that matters more than win rate
A 40% win rate can be healthy and a 70% win rate can lose money. Expectancy explains why.
Win rate is the most quoted trading statistic and one of the least informative on its own.
Definition
Expectancy is the average amount you make or lose per trade:
expectancy = (win rate × average win) − (loss rate × average loss)
Expressed in R (multiples of initial risk) it becomes comparable across accounts and markets.
Two traders
| Trader A | Trader B | |
|---|---|---|
| Win rate | 70% | 40% |
| Average win | 0.5R | 2.2R |
| Average loss | 1.3R | 1.0R |
| Expectancy | −0.04R | +0.28R |
Trader A wins far more often and still loses money over time.
Break-even win rate
For a fixed reward-to-risk ratio R, the win rate needed to break even (ignoring costs) is:
break-even win rate = 1 ÷ (1 + R)
At 1:2 that is 33.3%; at 1:1 it is 50%. The Break-Even Calculator shows this for any ratio.
Sample size
Expectancy estimated from 15 trades is mostly noise. Treat numbers from small samples as provisional and keep journaling — the Analytics page recalculates expectancy as your sample grows.
Costs matter
Fees, spreads and slippage come straight off expectancy. A strategy with +0.05R before costs can easily be negative after them, especially on short timeframes.
Educational content only — not financial advice. Trading involves risk of loss.
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