Quantify your edge.

What expectancy measures

Expectancy collapses win rate and payoff into a single number: the average dollar result per trade. E = (win% × average win) − (loss% × average loss). Positive means the strategy makes money over a large enough sample; negative means no amount of discipline saves it.

It is the number that settles the perennial argument about whether win rate or reward matters more. Neither does, individually — only their product. A high win rate with tiny wins and occasional large losses is a common and thoroughly negative-expectancy pattern.

A worked example

A strategy wins 40% of the time, averaging $600 on winners and $250 on losers. Expectancy is (0.40 × $600) − (0.60 × $250) = $240 − $150 = $90 per trade.

Across 200 trades that is $18,000 of expected profit, achieved while being wrong three times out of five. It also means a run of six consecutive losses is entirely normal here — the edge lives in the average, and the average needs volume to assert itself.

Where this calculator misleads you

The inputs are estimates from your own history, and a short history estimates badly. Thirty trades cannot distinguish a real edge from a lucky streak; the confidence interval around a win rate measured on a small sample is wide enough to include zero. Treat expectancy computed on fewer than a hundred trades as a hypothesis.

Averages also hide their own distribution. A $600 average win built from one $8,000 outlier and nineteen small gains is not the same strategy as one that reliably makes $600, even though both produce identical expectancy. Look at the median alongside the mean before trusting the figure.

And expectancy is backward-looking by construction. It describes what your strategy did in the regime it was tested in. Volatility shifts, liquidity changes, and crowded trades all degrade edges that were real, and the formula has no way of signalling when that has begun.

Terms on this page

Expectancy

Average profit or loss per trade: (win% × avg win) − (loss% × avg loss).

Sample size

Number of trades behind the estimate. Below ~100, variance dominates the signal.

Outlier

A single result large enough to distort the average. The usual reason backtested expectancy fails to repeat.

Regime

The prevailing market conditions an edge was measured in. Edges are rarely regime-independent.