Calculate your expected profit per trade and determine whether you have a positive edge in the market.
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50% win rate, $200 avg win, $100 avg loss. The standard textbook setup.
62% win rate with smaller average wins — common for scalpers and momentum traders.
35% win rate but 3.3:1 reward-to-risk. Trend follower or swing trader style.
Wins slightly more often but average loss exceeds average win. Common early-stage trader trap.
Below 50% win rate and poor R:R. Very common pattern in new traders chasing trades.
Wins 70% of the time but losers are 1.5x larger than winners. Feels good, bleeds money.
Expectancy is the average amount of money you can expect to make (or lose) per trade over a large sample size. A positive expectancy means you have an edge — you will make money if you execute consistently. A negative expectancy means even perfect execution will eventually lose money.
Unlike win rate alone, expectancy accounts for both how often you win AND how much you win vs lose. A trader with a 30% win rate can be highly profitable if average wins are 5× average losses.