Trading expectancy explained: which of your setups make money?

Trading expectancy explained with real numbers: the expectancy formula in dollars and in R, per setup and after fees, plus the mistakes that make it lie to you.

2026-11-02

Your total P&L says whether you made money. It doesn't say which setups made it and which quietly gave it back. For that you need trading expectancy: the average amount each trade of a setup earns or loses, measured over many trades.

The expectancy formula for trading is simple: Expectancy = (win rate × average win) − (loss rate × average loss). Run it per setup, after fees, and you'll know which setups deserve your size and which deserve to be retired.

The formula, with real arithmetic

Say (hypothetically) you took 40 breakout trades: 18 winners averaging $150 and 22 losers averaging $90.

• Win rate: 18 ÷ 40 = 45%. Loss rate: 55%.
• Win side: 0.45 × $150 = $67.50
• Loss side: 0.55 × $90 = $49.50
• Expectancy: $67.50 − $49.50 = $18 per trade

There's a shortcut that gives the same answer: total P&L divided by number of trades. 18 × $150 = $2,700 won, 22 × $90 = $1,980 lost, $720 net, divided by 40 trades = $18. The long formula is still worth knowing, because it shows you which lever to pull: win rate, the size of your winners, or the size of your losers.

For example, if you cut your average loss from $90 to $75 by respecting your stop, expectancy becomes 0.45 × $150 − 0.55 × $75 = $67.50 − $41.25 = $26.25. Same entries, same win rate, 46% more per trade. Shrinking losses is often the cheapest improvement available.

Expectancy in R

Dollars mix in your position size. If you traded 1 MES some days and 4 on others, dollar averages mostly measure how big you were. R fixes that: R is the amount you risked on the trade, so a winner that made twice your risk is +2R. The full explanation is in R-multiples explained.

The same hypothetical trades in R: average win 1.6R, average loss 1R. Expectancy = 0.45 × 1.6 − 0.55 × 1 = 0.72 − 0.55 = +0.17R per trade. If you risk $100 a trade, that's about $17, and the R number stays true when you change size.

Dollars tell you what you made. R tells you whether the setup works.

After fees, or it doesn't count

Many platforms show P&L before commissions and exchange fees. Your expectancy should be after them. Find your real round-trip cost per contract on your statement, multiply by contracts, and subtract it from every trade.

A hypothetical: a round trip costs you $2 per contract and you average 3 contracts, so $6 a trade. The $18 breakout becomes $12. Still solid. But a setup averaging +$5 before fees, at the same cost, is now −$1 per trade: a leak dressed up as an edge. Slippage on stop exits pushes it further.

A sample setups table

Here's a sample trader in our demo, every setup across their whole career:

Four things jump out.

• Reversal is a leak. 117 trades is plenty of evidence, and it lost about $24 a trade. Not trading it would have kept roughly $2,800.
• Opening range has the best expectancy but the smallest sample. 85 trades is past the 30-trade minimum, but it's the number most likely to shift as more trades come in.
• Pullback is the most traded and the thinnest. +$7.95 a trade over 257 trades is real, but a slightly higher fee or a little more slippage would shrink it fast. Worth checking it's measured after costs.
• Breakout carries the account. Solid per-trade result, the biggest sample, the most total profit.

Here's the part most traders miss: the best fix in this table isn't a new setup. Dropping Reversal adds about $2,800. Doubling size on Pullback, even if its expectancy held at double size (which isn't guaranteed), would add about $2,000, with twice the risk. Stopping a leak takes no new skill and adds no risk.

Before you look for a new setup, stop the one that's losing.

What's a good expectancy?

There's no universal number, because it depends on your size, your instrument and your costs. A better question has three parts: is it clearly above zero after fees, over 30 or more trades, and is it big enough to survive a bad stretch? As a rough rule of thumb, treat anything under about +0.1R per trade as thin, because a bit of extra slippage or one rule break can erase it.

Then hold it up against your risk. At +$12 a trade and 40 trades a month, you'd average about $480 a month. But six losers in a row at $100 risk is −$600, more than a month of average gains, and streaks like that happen even with a real edge. Expectancy tells you where you end up over time. Your daily loss limit decides whether you're still trading when you get there.

Recompute it every quarter. Expectancy isn't fixed: markets change, and so do you. A setup that earned +0.3R last year and +0.05R this quarter isn't broken yet, but it's asking for a closer look.

Common expectancy mistakes

• Lumping setups together. One overall expectancy hides a leak inside an edge. In the table above, all five together look fine; separately, one is costing thousands.
• Too few trades. Under 30 trades, expectancy is mostly noise. See what is a trading edge for why.
• Ignoring fees. The most common one, covered above.
• Mixing sizes in dollars. Use R, or compare trades taken at similar size.
• Moving stops. If your stop moves, your R isn't real and your average loss grows past what you planned. See how to stop moving your stop loss.
• Forgetting frequency. +$20 a trade on two trades a day is about 40 trades in a month; +$40 on one trade a week is about 4. Expectancy times trades is what reaches your account, as long as the extra trades are the same setup and not filler.

How to calculate yours

• Tag each trade with one setup or Playbook play. One label per trade keeps the math clean.
• Filter one setup at a time and note trades, wins, losses, average win and average loss, after fees.
• Run the formula in dollars and in R.
• Sort by expectancy and look at the bottom row first.
• Decide: keep, shrink, rewrite or stop. Anything under 30 trades stays small until it has more.

Let the app build the table

In Market Matrix, My Trading Journey builds that table for you. Your edge, in My edge & milestones, lists every setup from your tags and Playbook plays across your whole career, with trades, win rate, per-trade result, total and each year's result. It labels each one Edge (30+ trades, earning per trade, green in at least half its years), Leak (losing per trade over 30+ trades) or Not proven yet.

See your setups in My Trading Journey →

It's a Pro feature, and every new member gets 14 days of everything free, no credit card. Whichever way you run it, the habit is the same: one formula, one setup at a time, after fees, and the bottom row first.

Start your free journal →

This article is for education only and isn't financial advice. Trading futures involves substantial risk of loss.