# Expectancy in Trading - The Most Important Metric > Expectancy tells you how much you make on average per trade including both winners and losers. It is the single most predictive metric for long-term profitability. **Tags:** expectancy, metrics, analytics, edge, performance **URL:** https://traderjournal.app/trading-metrics/expectancy-in-trading-most-important-metric --- # Expectancy in Trading - The Most Important Metric Expectancy is the average amount you make per trade when you factor in both winning and losing trades. A positive expectancy means your strategy makes money over time. A negative expectancy means it loses money, no matter how good any individual trade feels. It is, arguably, the most important number in trading. --- ## The Formula Expectancy = (Win Rate x Average Win) - (Loss Rate x Average Loss) Where: - Win Rate = percentage of trades that win (as a decimal) - Average Win = average profit on winning trades - Loss Rate = 1 - Win Rate - Average Loss = average loss on losing trades (as a positive number) **Example:** Win rate: 55% (0.55) Average win: $150 Loss rate: 45% (0.45) Average loss: $90 Expectancy = (0.55 x $150) - (0.45 x $90) = $82.50 - $40.50 = $42.00 On average, this strategy makes $42 per trade across a large sample. --- ## Why Expectancy Is More Useful Than Win Rate or Profit Factor Alone Win rate tells you how often you win but not what you win or lose. Profit factor tells you the ratio of gross profit to gross loss. Expectancy tells you the dollar amount you expect to earn per trade. The dollar amount is the most actionable metric because it directly connects to your trading outcomes: - 100 trades x $42 expectancy = approximately $4,200 expected profit - 1,000 trades x $42 expectancy = approximately $42,000 expected profit This forward-looking projection assumes consistent strategy performance, which is never guaranteed - but it gives a concrete benchmark. --- ## What Negative Expectancy Tells You If your expectancy is negative, your strategy loses money over time. No position sizing rules can fix a negative expectancy strategy. The only solution is to fix the strategy. Negative expectancy results from one of three causes: 1. Win rate too low for your R:R ratio 2. Average loss too large relative to average win 3. Costs (spread, commission, swap) consuming the positive edge that exists before costs If your gross expectancy (before costs) is positive but your net expectancy (after costs) is negative, the strategy has edge but your costs are too high. Solutions: reduce trade frequency, find a lower-cost broker, or improve your entry precision to reduce spread impact. --- ## Expectancy Per Hour and Per Dollar Risked Two variations of expectancy are worth knowing: **R-Expectancy:** Express expectancy in multiples of your average risk rather than dollars. If you risk $100 per trade and your dollar expectancy is $42, your R-expectancy is 0.42R. This allows comparison across different account sizes. **Expectancy per hour:** For active traders, dividing expectancy by average time in a trade gives you expected earnings per hour of market exposure. This is useful for comparing strategies with different trade durations. --- ## Tracking Expectancy Over Time The most useful application of expectancy in a journal context is tracking it monthly. If your expectancy is stable and positive across 6+ months, you have evidence of a consistent edge. If it is declining month over month, something is changing - strategy performance, market conditions, or your execution. Trader Journal calculates expectancy in the Reports tab. Review it alongside profit factor and win rate as your primary performance dashboard. Download at android.traderjournal.app or ios.traderjournal.app.