Expectancy is the average dollar amount a trading system can be expected to make or lose per trade over a large sample, calculated from its win rate, average win size, and average loss size. A positive expectancy means the system makes money on average; a negative expectancy means it bleeds capital on average no matter how many trades you take. It is the single most important number for judging whether a strategy has edge, because unlike win rate or risk-reward in isolation, expectancy combines both.
Formula
Expectancy = (Win Rate × Average Win) − ((1 − Win Rate) × Average Loss)
Where Win Rate is the fraction of trades closed in profit (e.g. 0.55 for 55%), Average Win is the mean dollar profit on winning trades, and Average Loss is the mean dollar loss on losing trades expressed as a positive number.
Worked example
You take 100 trades. 40 win for an average of $300; 60 lose for an average of $150.
Win Rate = 0.40 Average Win = $300 Average Loss = $150
Expectancy = (0.40 × $300) − (0.60 × $150) = $120 − $90 = $30 per trade
Across 100 trades, the system produces roughly $3,000 in net profit. Notice the win rate is only 40% — losing more often than winning — yet the system is profitable because winners are twice the size of losers.
Why it matters
Expectancy answers the only question that matters about a strategy: should I keep trading it? Two systems with identical win rates can have wildly different expectancies depending on payoff structure. TraderPlusAI shows expectancy for your own synced trades in the Trading Account analytics, and your Financial Agent can break it down by setup to show which trade clusters drag it down.
Common pitfalls
Expectancy is unreliable on small samples. Below 30-50 trades the average win and average loss are too noisy to trust. A single outlier winner can flip a losing system into apparent positive expectancy — strip the top and bottom 5% and recompute to sanity-check.