Expectancy in trading: your system's key number

A decent win rate, profit factor above one, yet almost nothing in the account after a month. Every piece of the picture is there, but no result. Expectancy is the only metric that directly answers “does the system make money”: how much one trade brings on average.

The formula

Or more simply, from actual trades: total result ÷ number of trades. If you made 1,200 USDT after fees over 50 trades, expectancy is 24 USDT per trade.

Example

Win rate 45%, average win 180, average loss 100:

At 40 trades a month the expected result is about +1,040. This is not a promise: a real month can still be negative. Expectancy shows up over a long run, not in every week.

In money and in R

Expectancy in money depends on position size: double the risk and it doubles too. To compare periods and strategies fairly, it's more convenient to measure it in R — units of risk:

+0.3R means each trade brings on average a third of what you risk. This number stays the same whether you trade with 1,000 or 100,000.

+0.3R means each trade brings on average a third of the risk, on any deposit.

Expectancy and fees

Positive expectancy before fees means nothing yet. If you make many short trades and earn 3 USDT on average with an average fee of 2.5 USDT, your real margin is 0.5. Any deterioration in execution pushes the system into the red. That's why expectancy is calculated only from results after fees and funding.

If expectancy is smaller than the average fee, the system works for the exchange.

How to raise expectancy

• Cut the worst slice. Calculate expectancy separately by pair, setup and entry hour. Often one group of trades drags the overall result to zero.
• Don't cut profits short. Compare how far trades moved in your favour before the exit (MFE) with how much you took. If you consistently exit early, the average win is lower than it could be.
• Don't let a loss go beyond the plan. Every extra percent beyond the stop hits the average loss.

Where to see yours

You can estimate it from averages in the calculator. From real trades, Ordo Trade calculates expectancy in money and in R overall and for every slice: pair, setup, tag, weekday, entry hour. The “Strategy” section shows where you have an edge and where you don't.