Risk
What is Expectancy?
By the verify.trading team · Last reviewed · How we write
Expectancy is the average amount you expect to make or lose per trade: win rate times average win, minus loss rate times average loss.
Key points
- (win rate x average win) - (loss rate x average loss).
- Estimated from history, not guaranteed.
- Include spreads and commissions.
Expectancy explained
A positive expectancy is a necessary condition for a strategy to make money over many trades, but it is estimated from past trades and can change when markets do. Costs must be included.
Example
Win rate 40%, average win 300, average loss 100: (0.4 x 300) - (0.6 x 100) = 60 per trade before costs.
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