Expectancy
Expectancy is the average amount a strategy wins or loses per trade, calculated as (win rate × average win) − (loss rate × average loss). Positive expectancy means the strategy gains on average over many trades.
Expectancy collapses win rate and risk-reward into a single figure, which is why it is more useful than either alone. A strategy winning 40% of the time with average wins of $300 and average losses of $150 has an expectancy of (0.4 × 300) − (0.6 × 150) = $30 per trade.
The critical qualifier is 'over many trades'. Expectancy is an average, and averages say nothing about the order in which results arrive. A positive-expectancy strategy still delivers losing streaks, and if position sizing cannot survive them, the average never gets the chance to apply.
Expectancy calculated on fewer than a hundred trades is mostly noise, and expectancy calculated on inconsistent position sizes is not measuring the strategy at all.
Related terms
Maintained by Jared Sinclair, Founder · Syrax Global FZCO · Definitions are educational, not financial advice.
Knowing the vocabulary is the easy part.
Every term here can be learned in an afternoon. Applying them consistently under pressure is the part that decides outcomes — and the part we measure.