Expectancy

### What the number actually is Expectancy is the average result of one trade, repeated. FXStreet's trading learning center gives it as **(Average Profit x Win Rate) - (Average Loss x Loss Rate)**. Measure every outcome in R, units of the risk you had on at entry, and expectancy becomes the average R the system returns per trade. One number collapses how often you win and how much you win into the only quantity that compounds. The R-multiple framing was popularised by trading coach Van Tharp. Work the example. A 40% win rate, winners averaging 3R, losers averaging 1R: (0.40 x 3R) - (0.60 x 1R) = 1.2R - 0.6R = **+0.6R per trade** Six tenths of one risk unit per trade, on average, across many trades. Over 100 trades that is +60R, and at 1% risk per trade +60R works out to 60% of starting equity before compounding. That is arithmetic on assumed inputs, not a forecast, and no system is owed those inputs. Notice what the calculation never asks for: being right often. ### Why it outranks every other stat Win rate ignores size. Reward-to-risk ignores frequency. Profit factor hides how long it took. Expectancy is the only metric that survives being multiplied by *how often you trade*, which is what turns an edge into a result. Expectancy tells you the edge per trade. Expectancy times trade count tells you the edge per month. A +0.6R setup you can take twice a week and a +0.1R setup you can take twenty times a week are not the same business, and only expectancy plus frequency tells you which is which. ### Where people get it wrong - **Measuring it on too few trades.** The standard error of a win rate over n trades is the square root of p(1-p)/n. At a true 40% win rate, twenty trades gives a standard error of roughly 11 percentage points, so a "measured" 40% is honestly consistent with 29% or 51%. At 100 trades that tightens to about 5 points. Your first twenty trades tell you almost nothing about your edge. - **Quietly excluding trades.** The revenge trade counts. The "that wasn't really my setup" loss counts. An expectancy calculated on your best trades is not expectancy, it is a highlight reel. - **Forgetting costs.** Spread, commission and slippage shave the winners and deepen the losers. Compute expectancy from filled prices, not from the plan you wrote before entry. - **Expecting a smooth ride.** At a 40% win rate, the chance that any given run of five trades is five straight losses is 0.6 x 0.6 x 0.6 x 0.6 x 0.6, about 7.8%. Across a hundred trades, losing streaks are not a malfunction. They are the price of the +0.6R. Track it, or you are guessing about the only thing that matters.