The formula in one sentence: expectancy is computed as expectancy = (win rate × average win) − (loss rate × average loss). It's positive or negative depending on whether each trade pays off or costs on average. The tipping point — the breakeven win rate — equals loss ÷ (win + loss).
How to use it
Enter three numbers: your win rate (the share of winning trades), your average win on a winning trade and your average loss on a losing trade. The win and the loss use the same unit — multiples of risk (R) or an amount. The result updates instantly: the expectancy per trade, and the corresponding breakeven win rate.
How to read the result
Two numbers matter. The expectancy per trade says how much each trade pays off or costs on average; the breakeven win rate says at what win rate the strategy turns profitable, for a given win/loss ratio.
| Average win / loss ratio | Breakeven win rate |
|---|---|
| 1 : 1 | 50.0% |
| 2 : 1 | 33.3% |
| 3 : 1 | 25.0% |
| 1 : 2 | 66.7% |
The classic mistake
Judging a strategy on its win rate alone. A 90% win rate can hide a negative expectancy if the rare losses are huge; a 35% win rate can be very profitable if the wins are far bigger than the losses. It's the win/loss pair, combined with the win rate, that decides — never the win rate alone.
At Sextant
At Sextant — a transparent quant platform — this is exactly why we own up to a stated win rate between 52 and 58%. That figure is nothing to worry about as long as expectancy stays positive and stable, real costs included. The public logbook shows these metrics continuously, and the methodology explains how expectancy is measured.
Frequently asked questions
How do you calculate trade expectancy?
With expectancy = (win rate × average win) − (loss rate × average loss). For example, a 50% win rate, an average win of 2 and an average loss of 1 give (0.5 × 2) − (0.5 × 1) = +0.5 per trade: expectancy is positive.
What is the breakeven win rate?
It's the minimum win rate for expectancy to be zero, for a given win/loss ratio. It equals loss ÷ (win + loss). With an average win of 2 for a loss of 1, the breakeven win rate is 1 ÷ 3 = 33.3%: above it, the strategy wins on average.
Is a high win rate enough to be profitable?
No. The win rate says nothing about the size of wins and losses. A strategy can win often but small, and lose rarely but big: its expectancy is then negative. It's expectancy, not win rate, that determines whether a strategy creates or destroys capital.