Expectancy per trade
The average R per trade, and how widely luck spreads it. · 7 min
Decide first
Expectancy is what a method earns per trade on average, in R. It joins the win rate and the payoff into one number:
with p the win rate, W the average win and L the average loss, both in R (L is 1R when every loss is a full stop). At 40% wins and 2R targets, E = 0.4 × 2 − 0.6 = +0.2R per trade: about 20R per 100 trades, which at 1% risk is roughly +20% before compounding.
Expectancy is an average across many runs. One run of 100 trades of that +0.2R system still ends below zero 9.1% of the time (the exact binomial chance). The simulator below shows the spread: the same edge, a thousand alternate timelines.
Expectancy and luck
The same edge, traded 100 times on 1,000 alternate timelines. The band holds 90% of outcomes; thin lines are single paths.
Expectancy +0.350R per trade · profit factor 1.64
- Median result
- 40.3%
- 5% worst / best
- 7.2% / 78.1%
- Chance of ending down
- 1.2%
- Median max drawdown
- 7.7%
- Chance of a 50% drawdown
- 0.0%
- Kelly fraction
- 17.5% (half-Kelly 8.8%)
Worked example: expectancy from a journal
- 20 trades: 8 winners averaging +2.1R, 12 losers averaging −0.9R.
- Win rate 8 ÷ 20 = 40%.
- E = 0.4 × 2.1 − 0.6 × 0.9 = 0.84 − 0.54 = +0.30R per trade.
- Twenty trades is a tiny sample: the next twenty could easily show −0.2R from the same method. Module C1 measures how sure you can be.
Common mistake: expecting every stretch to be positive
A positive expectancy tells you where the average goes, not where next month goes. A trader who abandons a +0.2R method after a losing 50 trades (which happens about 16% of the time) throws away a working edge because of ordinary luck.
Check yourself
- Win rate 40%, average win 2.5R, average loss 1R. Expectancy per trade?
- Expectancy +0.22R per trade. On average, how many R over 100 trades?
- A system with a real +0.2R edge (40% at 2R). Can 50 trades of it end below zero?
Closing round
Play a full round, then compute your expectancy from the review: win rate × average win − loss rate × average loss. How many trades would you need before trusting it?
Play the round in the simulator →The simulator's markets are generated, not real prices; the round practises the arithmetic, it does not predict anything.
Further reading: Tharp, Trade Your Way to Financial Freedom. The lesson teaches the idea in its own words and exercises.