Performance Metric

Expectancy — Definition & Example

The expected profit or loss per trade, on average, over a large sample.

Expectancy is the most decision-useful metric for a strategy because it tells you what each trade is worth in expected value. A positive expectancy strategy makes money over time even if individual trades are random. Expectancy combines win rate and average win/loss into a single per-trade dollar (or ₹) value. Strategies with expectancy below ₹0 lose money over enough trades regardless of how good they "feel."

Formula

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

Example

Win rate 45%, average win ₹1,500, average loss ₹800. Expectancy = (0.45 × 1500) − (0.55 × 800) = 675 − 440 = ₹235 per trade. Over 100 trades, expected profit is ₹23,500.

Win Rate Profit Factor Average Win Average Loss Risk-Reward Ratio Disposition Effect Overtrading

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Expectancy — Definition & Example

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