GlossaryIntermediate
Trading Expectancy
The average amount a trading strategy expects to win or lose per trade, combining win rate with average win and loss size.
Trading expectancy is the average amount a strategy expects to win or lose per trade over time, calculated from its win rate combined with the average size of winning trades and the average size of losing trades.
A strategy can have a low win rate and still carry positive expectancy, if its average win is large enough relative to its average loss — see Kaavon's "Understanding Trading Expectancy" guide for the full calculation and why win rate alone is a misleading way to judge a strategy.
Examples
- A strategy that wins only 30% of the time can still have positive expectancy if its average win is several times larger than its average loss.
- Trading expectancy combines win rate and average win/loss size into a single figure, rather than judging a strategy on win rate alone.