Imagine two traders. One wins 70% of the time. The other wins only 45%. Which would you rather be? It sounds obvious until you know how much each trader makes when right and loses when wrong. This is where trading expectancy becomes useful.
What is trading expectancy?
Trading expectancy estimates the average amount a strategy has historically made or lost per trade.
With a 45% win rate, $250 average winner, and $125 average loser: (0.45 x $250) minus (0.55 x $125) = $43.75 per trade expected value. It does not mean your next trade will make $43.75. Individual outcomes can vary dramatically.
Positive vs negative expectancy
A positive expectancy means the historical combination of wins, losses and their sizes produced a positive average result. An 80% win rate can still have negative expectancy if occasional losses are enormous. That is why focusing exclusively on win rate can be misleading.
Why expectancy matters
Expectancy combines win frequency and magnitude of wins and losses, making it much harder for one attractive statistic to hide a structural problem in your trading.
Track expectancy over time
If your last 200 trades show +$38 per trade but your last 25 show -$11 per trade, that deserves investigation. Maybe market conditions changed. Maybe your execution changed. The numbers tell you where to look.
Break expectancy down further
Morning trades at +$52 per trade vs afternoon trades at -$17 per trade turns a vague goal of becoming a better trader into a much more specific problem to solve.
Expectancy is not a prediction
Historical expectancy does not guarantee future profitability. Trading conditions change, strategies decay, and execution varies. Treat it as a performance analysis metric, not a promise of what your next 100 trades will produce.
Calculate your own expectancy
MyTraderScore can analyze uploaded trading data so traders can evaluate metrics like expectancy alongside profit factor, win rate and other performance statistics.