VaultCharts
performance Metric

What Is Expectancy?

Expectancy is the average profit or loss per trade, often expressed in currency or as a percentage of risk.

Quick Answer

Expectancy is the average profit or loss per trade, often expressed in currency or as a percentage of risk.

What Does Expectancy Measure?

Expectancy is the expected value per trade: (Win Rate × Average Win) − (Loss Rate × Average Loss). It can be reported in dollars (average $ per trade) or as a multiple of risk (e.g. 0.5R per trade). Positive expectancy is necessary for long-term profitability; it combines win rate and payoff in one number. It does not tell you about variance, drawdowns, or position sizing.

Formula:
Expectancy = (Win Rate × Avg Win) − (Loss Rate × Avg Loss); or E = (Gross Profit − Gross Loss) / Total Trades

Typical range: Strategy-dependent; often reported as % or R multiples

How to Interpret Expectancy

  • 1Expectancy > 0: strategy has positive expected value per trade
  • 2Expectancy in “R” (risk units) helps compare across different position sizes
  • 3High expectancy with high variance can still mean large drawdowns
  • 4Use with win rate and profit factor for full picture

How to Use Expectancy in Backtesting & Portfolio Analysis

✓Verify strategy has positive expected value
✓Compare strategies in consistent units (e.g. R per trade)
✓Size positions based on edge (expectancy) and risk
✓Set realistic expectations for average trade outcome

Common Mistakes to Avoid

✕Ignoring variance and drawdown when expectancy is positive
✕Using too few trades so expectancy is noisy
✕Mixing different definitions (per trade vs per period)
✕Assuming expectancy is stable across regimes

Backtest with Expectancy in VaultCharts

VaultCharts includes backtesting with built-in and custom strategies. Analyze Expectancy, Sharpe ratio, max drawdown, and more—all with your data stored locally.

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Related Backtesting Metrics

Win RateProfit FactorSharpe RatioMax Drawdown