Expectancy is your average result per trade: E = win% × average win − loss% × average loss. Positive means the system makes money over many trades; zero or negative means no position sizing can save it. Win rate alone is meaningless without reward-to-risk — a 40% win rate at 2R beats a 70% win rate at 0.3R.
What expectancy actually measures
Expectancy is the average profit or loss you can expect per trade, given your win rate and the size of your average winner versus your average loser. It collapses an entire strategy into one number. If it is positive, every trade is — on average — worth taking; if it is negative, the strategy bleeds money no matter how you size positions.
You can measure wins and losses in dollars or in R (multiples of the amount you risk per trade). R is more portable: a system with +0.35R expectancy keeps that edge whether you risk $10 or $1,000 per trade. This calculator accepts both and converts using 1R = 1% of your account.
Win rate vs reward-to-risk: the breakeven line
A high win rate feels good but means nothing on its own. What matters is the combination of win rate and reward-to-risk (R). The breakeven win rate is the win rate at which a system exactly breaks even for a given R:
At 2R you only need to win 33.3% of the time to break even; at 1R you need 50%; at 0.5R you need 66.7%. Your edge is how far your real win rate sits above that line. Profit factor — gross profit divided by gross loss — is another lens on the same thing: above 1.0 is profitable, above 1.5 is healthy.
Why a positive edge can still blow up
Positive expectancy is necessary but not sufficient. Real win rates and average win/loss drift — the 55% you backtested can be 48% live. And even a genuinely profitable system goes through losing streaks; if you size positions too aggressively, variance can ruin the account before the edge plays out. The simulated paths above show how widely outcomes scatter around the expected line.
That is why expectancy pairs with two other tools: the Monte-Carlo risk simulator shows your probability of ruin, and the Kelly criterion calculator tells you how much to risk so the edge compounds instead of killing you.
