What Is Expectancy in Trading?
Expectancy is the average profit or loss a trader can expect from a single trade, calculated from win rate and average win/loss size over a large enough sample. It is the one number that combines "how often do I win" with "how much do I win or lose" into a single measure of whether a strategy has a real, repeatable edge.
Formula
Expectancy = (Win% × Avg Win) − (Loss% × Avg Loss)Worked example
A trader reviews 60 trades: a 42% win rate, an average winner of ₹6,000, a 58% loss rate, and an average loser of ₹2,500. Expectancy = (0.42 × 6,000) − (0.58 × 2,500) = ₹2,520 − ₹1,450 = ₹1,070 per trade.
That means, on average, this strategy is worth ₹1,070 every time it is taken — a genuine positive edge, even though the trader loses more often than they win. Multiply expectancy by the number of trades taken per month to see the strategy’s real earning potential.
What's a good number?
Expectancy must be positive for a strategy to have any long-run edge — a negative number means the system loses money on average no matter how it feels trade to trade.
Beyond "positive," the right comparison is expectancy × trade frequency across your different playbooks, not the raw expectancy number alone. A strategy with lower per-trade expectancy but much higher frequency can out-earn a higher-expectancy strategy that trades rarely.
Common mistakes traders make with expectancy
- Judging expectancy off fewer than 30 trades — small samples are dominated by variance, not edge.
- Calculating expectancy before subtracting brokerage, STT, and other fees, which quietly turns a marginal edge negative.
- Comparing expectancy in raw rupees across accounts of different sizes instead of expectancy in R, which normalizes for position size.
- Abandoning a strategy with genuinely positive expectancy after a normal losing streak, without checking whether the underlying win rate or R:R actually changed.
TradeMind calculates expectancy automatically per playbook and strategy from your logged trades, so you can rank and scale the setups that actually carry a real edge inside your AI trade analysis.