expectancy
The average result of one trade after costs, computed from many trades; positive means the plan earns over time.
Expectancy is the average result per trade after costs, estimated from a series of trades. It combines how often trades win with the average size of wins and losses.
A simple formula is: win rate × average win − loss rate × average loss, then subtract any costs not already included. A positive result in a historical sample is not a promise of future profit. Fewer than 30 trades are too few to tell much.
Use consistent records and include spread, fees, and slippage. The estimate can change as more trades are added.
Example
In 40 made-up Harbor 20 Index Fund practice trades, 20 win an average of $30 and 20 lose an average of $20. Before costs, expectancy = (20 ÷ 40 × $30) − (20 ÷ 40 × $20) = $15 − $10 = $5 per trade.
If average costs are $1 per trade, the estimated expectancy after costs is $5 − $1 = $4 per trade. This sample calculation describes those 40 trades; it does not predict the next one.
Common mistakes
- Trusting a result calculated from fewer than 30 trades.
- Leaving out costs or mixing gross and net results.
- Treating positive historical expectancy as a guarantee.
- Most people who trade lose money.
Learn it in the course
- Expectancy: the average trade · Compute what an average trade earns after costs from a real trade list, and see why ten trades can tell the opposite story from forty.
- A losing streak is normal · See how long a losing run can last in a sound plan, and why one trade or ten trades prove nothing either way.
- Case: compare two trade lists · Two journals, two styles: compare expectancy after costs, drawdown, sample size and discipline, then say which plan is worth continuing and what would change your mind.