How to Calculate Expectancy

What expectancy tells you

Expectancy is the average amount you expect to make (or lose) per trade, expressed in R-multiples. A positive expectancy means your system has an edge over a large sample of trades; a negative one means it will lose money on average regardless of position sizing.

Expectancy is one of the most important numbers in systematic trading because it separates luck from skill. A trader with a 70% win rate can still have negative expectancy if their losses are much larger than their wins.

The formula

Expectancy = (Win Rate × Average Win R) − (Loss Rate × Average Loss R)

Where:

• Win Rate = winning trades ÷ total trades (as a decimal, e.g. 0.45 for 45%)
• Average Win R = average profit on winning trades ÷ amount risked
• Loss Rate = 1 − Win Rate
• Average Loss R = average loss on losing trades ÷ amount risked

Step-by-step walkthrough

Step 1: Calculate your win rate

Count your winning and losing trades over your last 50–100 trades. Divide winning trades by total trades.

Example: 45 wins from 100 trades → Win Rate = 45% (0.45)

Step 2: Find your average win in R

For each winning trade, divide profit by the amount you risked on that trade. Sum all the ratios and divide by number of winning trades.

Example: You risked ₹1,000 on each trade. Your winning trades returned an average of ₹2,000 each. Average Win = 2R.

Step 3: Find your average loss in R

For each losing trade, divide the loss by the amount risked. Average those values.

Example: Your losing trades lost an average of ₹950 each (after slippage). Average Loss = 0.95R.

Step 4: Apply the formula

Win Rate = 0.45
Loss Rate = 0.55
Expectancy = (0.45 × 2) − (0.55 × 0.95)
           = 0.90 − 0.52
           = +0.38R

Step 5: Interpret the result

+0.38R means you expect to earn 0.38R per trade on average. Over 100 trades at 1% risk per trade, that is approximately 38R — or roughly 38% return on account before compounding.

How many trades do you need?

At least 30 trades to get a rough estimate, and ideally 50 or more for statistical stability. With fewer than 30 trades, random variance can make a losing system look profitable or vice versa.

Common mistakes

• Small sample sizes: Calculating from 10–15 trades produces noisy results. Use at least 30.
• Not accounting for slippage and brokerage: These reduce your actual average win and increase your average loss. Include them in the calculation.
• Using currency instead of R: Calculating in rupees or dollars makes it impossible to compare systems that use different position sizes. Always convert to R-multiples.
• Treating expectancy as permanent: A system's edge can degrade over time as market conditions change. Recalculate every 50–100 new trades.

How Tracktions calculates this

Tracktions automatically computes expectancy from your closed trades — no spreadsheet needed. Once you import or log trades, expectancy updates in real time on the Analytics dashboard, filtered by strategy, instrument, or time period.

See it in Tracktions →