Expectancy
Expectancy is the average dollar amount you can expect to win or lose per trade over time. Positive expectancy means the strategy is profitable long-term, regardless of short-term results.
Definition
Expectancy combines win rate and risk/reward into a single number: the expected value of the next trade. It's the most important metric for judging a strategy. A high win rate with low R:R can have identical expectancy to a low win rate with high R:R. Expectancy below zero means the strategy is mathematically losing — no amount of discipline fixes a negative-expectancy system.
Formula
Expectancy = (Win % × Avg Win) − (Loss % × Avg Loss)
Example
60% win rate, $300 avg win, 40% loss rate, $200 avg loss. Expectancy = (0.6 × 300) − (0.4 × 200) = $180 − $80 = $100 per trade.