Why expectancy beats win rate every time
Win rate is the most over-rated number in trading. It feels like skill — I'm right 70% of the time! — but it says nothing about the size of being right versus the size of being wrong. Expectancy combines both: (win rate × average win) − (loss rate × average loss). A 70% system that books $20 winners but holds $80 losers has expectancy of 0.7 × 20 − 0.3 × 80 = −$10 per trade. Every trade, on average, loses ten dollars. The win rate is gorgeous and the equity curve still points at zero. Flip it: a 40% win rate with 3:1 winners has expectancy of 0.4 × 300 − 0.6 × 100 = +$60 per trade — a brutal-feeling system that prints money.
Profit factor — the second opinion
Profit factor is gross profit ÷ gross loss across your sample. It's the same edge viewed as a ratio: above 1.0 you make money, and most durable strategies live in the 1.3–1.7 band once fees are honest. A profit factor of 2.0+ over a large sample is genuinely excellent — but if it comes from twelve cherry-picked trades or an over-optimised backtest, treat it as fiction. Cross-check the streaks that edge will throw at you with the losing streak simulator, and the chance of ruin with the risk of ruin calculator.
Fees are part of the edge, not a footnote
On a futures scalp, round-trip fees and slippage can be a few dollars — trivial on a $300 winner, fatal on a strategy whose raw expectancy is only $4 per trade. This calculator subtracts your fee estimate from every trade so you see the net expectancy you actually keep. If a strategy is only profitable before costs, it isn't profitable. Size the survivors with the position size calculator and confirm the reward:risk with the risk/reward calculator.
How to use it
1. Enter your real, fee-adjusted win rate over a meaningful sample — not your best week.
2. Enter the average size of your winning and losing trades in dollars.
3. Add fees + slippage per trade and how many trades you want to project.
4. Read the expectancy: positive means an edge, negative means the system loses money no matter how good it feels.
FAQ
What's the difference between expectancy and profit factor? Same edge, two views. Expectancy is in dollars (or R) per trade; profit factor is the dimensionless ratio of total wins to total losses. Both must clear their thresholds — positive expectancy and profit factor above 1 — for a strategy to be worth trading.
What is an R multiple? R is your risk per trade. A win of 2R means you made twice what you risked; a 1R loss means you lost exactly your planned risk. Entering your risk-per-trade shows expectancy in R, which makes strategies comparable regardless of account size.
How many trades do I need before I trust this? At least 30–50 for a rough read, 100+ before you bet size on it. Small samples are dominated by luck — a great-looking expectancy from ten trades is noise.