What Is Expectancy and Why It Beats Win Rate
Win rate is the number traders love to quote. It’s easy to understand, it feels good when it’s high, and it tells you almost nothing about whether you’ll make money.
Understanding what is expectancy and why it beats win rate gives you the one figure that actually answers that question. It combines how often you win with how much you win and lose, and it’s the number your account balance follows over time.
What Expectancy Is
Expectancy is your average result per trade. Positive means your strategy makes money over a large number of trades. Negative means it loses, however good individual weeks feel.
The formula is short. Multiply your win rate by your average win, then subtract your loss rate multiplied by your average loss. The result is what you can expect to make, on average, every time you take a trade.
It’s easiest to work in R, where 1R is the amount you risk on each trade. That way the number stays the same whatever account size or lot size you use, and you can compare setups fairly.
Why Win Rate on Its Own Misleads
Take two strategies. Strategy A wins 70% of the time, with an average winner of 0.5R and an average loser of 1.5R. Its expectancy is 0.7 multiplied by 0.5, minus 0.3 multiplied by 1.5, which is minus 0.1R per trade. It loses money while winning most of its trades.
Strategy B wins only 40% of the time, but its average winner is 2R and its average loser is 1R. Its expectancy is 0.4 multiplied by 2, minus 0.6 multiplied by 1, which is plus 0.2R per trade. It loses more often and makes money.
High win rates often come from taking profit early and letting losers run. It feels good for weeks, then one or two large losses wipe out a long string of small wins.
The Breakeven Win Rate
Every reward-to-risk ratio has a win rate you need just to break even, before costs. Divide 1 by 1 plus your average reward in R.
At 1R reward for 1R risk, you need to win 50% of the time. At 2R you need about 33%. At 3R you need 25%. If your actual win rate is above the breakeven figure for your average reward, your expectancy is positive.
This is a quick way to sanity check a strategy. A setup that targets 1R but only wins 45% of the time is losing money, however confident it feels.
Include Your Costs
Expectancy only counts if it’s measured after spread, commission and swap. A strategy making 0.1R per trade before costs can turn negative once they’re taken out, especially on short timeframes where costs are a bigger share of each trade.
MetaTrader 5 shows this directly. Its trading report includes Expected Payoff, which is the average result per trade on your account history. Compare it with your round-trip cost per trade to see how much of your edge is left after costs.
Expectancy on a Prop Account
Positive expectancy is necessary but not enough on a prop account. You also have to survive the losing streaks long enough for it to play out.
Lower win rates mean longer losing runs. In a simulation of 100 trades, a strategy that wins 35% of the time had at least one streak of eight or more losses about two times in three. At 60% wins, the same streak showed up in about one run in twenty-five.
On a standard TTT Markets 2-Step, there’s a 4% daily drawdown and an 8% maximum drawdown, both measured on real-time equity. Eight losses at 1% risk each is the whole maximum loss. Eight losses at 0.5% is half of it. So size each trade for the worst streak your strategy is likely to produce, not the average one.
How to Track It
Log every trade with its result in R, including commission and swap. Work out expectancy over your last 50 to 100 trades and update it regularly.
Track it by setup too. An overall figure can hide one setup carrying the account and another quietly losing money.
Conclusion – What Is Expectancy and Why It Beats Win Rate
What is expectancy and why it beats win rate comes down to this. Win rate tells you how often you’re right. Expectancy tells you whether being right pays. Work it out in R after costs, check it against the breakeven win rate for your reward-to-risk, and on a TTT Markets account, size your trades so the losing streaks that come with your win rate fit inside the 4% daily and 8% maximum limits.
FAQ – What Is Expectancy and Why It Beats Win Rate
1. What is a good expectancy for a trading strategy?
Any figure reliably above zero after costs is an edge. Many workable strategies sit between 0.1R and 0.3R per trade. What matters most is that it holds up over a large sample, not how big it looks over a few trades.
2. Can a strategy with a 30% win rate be profitable?
Yes, as long as the average winner is large enough. At 30% wins, an average reward above about 2.33R per 1R risked gives positive expectancy before costs.
3. Where can I see expectancy in MT5?
The MetaTrader 5 trading report shows Expected Payoff, which is your average result per trade. Divide it by your typical risk per trade to express it in R.
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