What is win rate?
Win rate is the percentage of measured trades classified as winners. Fifty winners from 100 completed trades corresponds to a 50% win rate.
What is expectancy?
A common simplified expectancy expression is: (win probability × average win) − (loss probability × average loss).
The values should be measured consistently and trading costs should be incorporated when evaluating a real strategy.
A lower win rate can still have positive expectancy
Suppose a strategy wins 40% of trades, with an average winner of 2R, and loses 60%, with an average loser of 1R.
Expectancy in R
(0.40 × 2R) − (0.60 × 1R) = +0.20R per trade before costs. The example shows why win rate alone does not determine profitability.
Sample size and changing markets
Expectancy estimated from a small number of trades can be unstable. Market regimes also change, so historical expectancy is not a guarantee of future performance.
Common mistakes
Optimizing only for win rate
A strategy can win frequently while occasional large losses erase many small gains.
Ignoring costs
Fees, funding and slippage can turn marginal gross expectancy negative.
Using too little data
A short winning streak does not establish a durable statistical edge.
Key takeaways
- Win rate measures frequency of winners, not overall profitability.
- Expectancy combines win probability with average win and average loss.
- A strategy can have positive expectancy with a win rate below 50%.
- Costs, sample size and changing market conditions must be considered.
Sources & further reading
This lesson is educational material. Market structure, exchange rules, fees, margin requirements and derivatives mechanics can differ by venue and can change over time. Verify current rules with the venue you use.