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TRADECALC_SUITE

Win Rate & Expectancy

Expected Value (Per Trade)+$50.00Implied R:R is 1:2.00

Monte Carlo Risk Simulator

Simulates 1,000 parallel realities (100 trades each) based on your 50% win rate and current account size to find your exact probability of ruin (-50% drawdown).

Understanding Trading Expectancy

What is Expected Value (EV)?

Expectancy, or Expected Value (EV), is the mathematical formula that tells you exactly how much money you can expect to make (or lose) on average per trade. It is the ultimate measure of a trading system's edge. A trading system with a positive EV is mathematically guaranteed to be profitable over a large enough sample size, regardless of individual winning or losing streaks.

The Mathematical Formula

To calculate the expectancy of your trading system, you multiply your win rate by your average winning amount, and subtract your loss rate multiplied by your average losing amount.

Expectancy = (Win_Percentage * Average_Win_Size) - (Loss_Percentage * Average_Loss_Size)

Practical Trading Scenario

Many novice traders obsess over their Win Rate, falsely believing they need to win 80% or 90% of their trades to be successful. However, expectancy proves this wrong.

Assume your trading strategy only wins 40% of the time. But when you win, you hold your winners for an average gain of $300. When you lose, you cut your losses quickly at an average of $100.

Using the formula: (0.40 * $300) - (0.60 * $100) = $120 - $60 = +$60.

Your expectancy is +$60 per trade. Even though you lose 6 out of 10 trades, you are mathematically printing money over the long run. Conversely, a trader who wins 90% of the time but takes a massive $1,000 loss for every $100 win has a negative expectancy and will eventually blow up their account.