Expectancy

Expectancy is the average dollar (or percent) result you expect from a single trade after accounting for both wins and losses:

Expectancy = winRate x avgWin - lossRate x avgLoss

where lossRate = 1 - winRate.

A positive expectancy means the strategy has a mathematical edge; a negative one means it bleeds money over time regardless of position size.

Worked example. Suppose a strategy wins 45% of the time with an average win of $200 and loses 55% of the time with an average loss of $100:

Expectancy = 0.45 x 200 - 0.55 x 100 = 90 - 55 = $35 per trade

Each trade is worth $35 in expectation. Scale the number up or down by position size, but do not let a high per-trade expectancy tempt you into oversizing — see position sizing for how to translate edge into appropriate risk per trade.

Expectancy is a research output, not a profit guarantee. Always measure it out-of-sample to avoid inflating it through overfitting.