{"slug":"expectancy","term":"Expectancy","category":"Quant & Stats","definition":"Expectancy is the average amount a strategy earns or loses per trade: (win rate × average win) minus (loss rate × average loss). Positive expectancy means the edge is real across many trades; negative expectancy means fees and losers grind the account down regardless of how good individual trades feel.","street":"It's the only number that says whether your system prints or bleeds — everything else is decoration.","depth":["Worked example: 40% win rate, average winner 2R, average loser 1R gives (0.4 × 2) − (0.6 × 1) = +0.2R per trade. Risking 1% per trade over 100 trades, that's roughly +20% before costs — and costs matter, because taker fees plus funding on perps can shave 0.05-0.1R per trade, enough to flip a thin edge negative. Multiply expectancy by trade frequency to see what a system actually pays per month.","The misread that costs money is judging expectancy on ten trades. A genuinely positive system still serves up five- and six-trade losing streaks on schedule — which is precisely when traders abandon it, usually right before it pays — while a hot streak on a negative-expectancy system convinces them to double size. Log every trade, compute the number on 50-100 of them, and re-check quarterly, because edges decay as the crowd finds them. Feelings vote every trade; expectancy votes once, at the end."],"live":{"label":"Closed calls, and how far each one moved","href":"/radar"},"related":["win-rate","risk-reward","backtest","drawdown"]}