Win rate can fool you. A trader bragging about “80% win rate” sounds unbeatable, until you find out they take ₹100 wins and ₹1,000 losses. Expectancy fixes that. It is the average rupees you make (or lose) per trade, across all your trades combined.
The formula: Expectancy = (Win Rate × Avg Win) − (Loss Rate × Avg Loss). If expectancy is positive, your system makes money over time. If it’s negative, you will lose money, sooner or later, no matter how good a single week looks.
Worked example: 10 recent trades
- Total trades
- 10
- Wins / losses
- 6 / 4
- Win rate
- 60%
- Avg winning trade
- ₹1,662.50
- Avg losing trade
- ₹927.50
- (0.60 × 1,662.50)
- + ₹997.50
- (0.40 × 927.50)
- − ₹371.00
Expectancy per trade
+ ₹626.50
Across 100 trades, this system makes roughly ₹62,650 in net P&L. Across 1,000 trades, ₹6,26,500.
Why win rate alone is a trap
Consider two systems. System A has a 40% win rate but the average winner is 3× the average loser. System B has a 60% win rate but the average winner is half the average loser. System A’s expectancy is +0.6R; System B’s is −0.1R. The “losing” trader (System A) is profitable. The “winning” trader (System B) is bleeding money. They just don’t notice for a while because they win often.
What changes when you track expectancy
Once you know your expectancy, three things happen. First, you stop chasing trade ideas that promise a high win rate but tiny profit targets. Second, you start asking “does this setup have an edge?” with real math instead of a feeling. Third, you size positions based on edge, bigger when expectancy is high, smaller when you’re testing something new.
Calculating expectancy needs a journal. You can’t eyeball it from memory because memory is biased toward recent trades and emotionally vivid ones (the big winner you bragged about, the gut-punch loss).