Risk like a professional 6 minFREE
Expectancy: the only number that matters
Why a 35 % win rate can beat a 70 % one.
Beginners judge a strategy by how often it wins. Professionals judge it by expectancy: how much it makes, on average, per trade.
The formula
Expectancy = (win rate × average win) − (loss rate × average loss).
- Strategy A wins 70 % of the time, makes $50 when it wins and loses $150 when it loses: 0.7 × 50 − 0.3 × 150 = −$10 per trade. It feels great and slowly loses money.
- Strategy B wins 35 % of the time, makes $300 when it wins and loses $100 when it loses: 0.35 × 300 − 0.65 × 100 = +$40 per trade. It feels bad most days and makes money.
The trap of the first strategy is real: taking profits early and letting losses run produces a high win rate and a negative expectancy. It's the most common pattern in beginners' accounts.
Measure it on yourself
After 30 closed trades, compute your own win rate, average win and average loss. A positive expectancy over 30 trades is a hint, not a proof (see “Luck or skill?”). A negative one is a clear message: change the exits, not the entries.
Check what you’ve learned
Two questions from this lesson. Get both right to mark it as done.