What is expectancy in trading?
Expectancy in trading is the average expected return per trade, calculated as: (win_rate × average_win) − (loss_rate × average_loss). Positive expectancy means the strategy is profitable over time; negative means it loses money. Expectancy is the single most important strategy metric — more important than win rate alone.
More detail
A 70% win rate strategy with negative expectancy (small wins, big losses) loses money. A 40% win rate strategy with strong R/R can be very profitable.
Calculate expectancy from your trade journal: it's the average of your trade outcomes per dollar risked.
Backtest expectancy assumes perfect execution. Real-world expectancy is typically 20-30% lower due to slippage and missed fills.