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Log in with DiscordWin Rate And Expectancy
Win rate is profitable trades divided by all completed trades in the stated sample. Expectancy, when calculated from completed results, is the average result per trade. Together they explain more than the percentage of winners alone.
Calculate The Averages From Your Trade Log
Use the complete net result for each completed trade, including all partial exits and costs. Classify each as a win, loss or breakeven. Count all three groups in the total number of trades.
To find average win, add the net profits of the winning trades and divide by their count. If 55 winners earned $5,500.00, the average win is $100.00. To find average loss, add the dollar amounts lost on losing trades and divide by their count. If 45 losers lost $4,500.00, the average loss is $100.00. Use the positive loss amount when comparing sizes; subtract it when calculating the total result.
The full sample therefore earns $1,000.00 across 100 trades, or $10.00 per trade. That average is the observed expectancy. It describes the sample; it does not forecast the next trade.
A few unusually large losses can change the average substantially. If 39 losses are $100.00 each and one is $1,000.00, the 40 losses total $4,900.00 and average $122.50. Looking only at the usual $100.00 loss misses the effect of that one trade. Inspect the larger loss to understand whether it involved quantity, execution or a change to the exit.
A 55% Or 60% Win Rate Can Be Profitable
Winning more often than losing can produce a profit when the average loss stays small enough relative to the average win. The size of the losses matters just as much as how many trades win.
Consider two samples of 100 completed trades. Results in this table are after all trading costs.
| Win rate | Wins | Losses | Average win | Average loss | Net total |
|---|---|---|---|---|---|
| 55% | 55 | 45 | $100.00 | $100.00 | +$1,000.00 |
| 60% | 60 | 40 | $100.00 | $100.00 | +$2,000.00 |
At 55%, winners contribute $5,500.00 and losses subtract $4,500.00. At 60%, the figures are $6,000.00 and $4,000.00. The average net result is +$10.00 and +$20.00 per trade respectively.
Now keep the 60% win rate and $100.00 average win, but let the average loss grow to $175.00. The winners still earn $6,000.00; the 40 losses now cost $7,000.00. The sample loses $1,000.00 despite winning six trades out of ten.
At a 55% win rate and $100.00 average win, the average loss must stay below approximately $122.22 for a positive average result when using net figures. At 60%, the corresponding breakeven average loss is $150.00. These two examples assume no breakeven trades. They follow from dividing total winning dollars by the number of losing trades. They describe the sample’s arithmetic, not suggested loss limits.
Managing risk means controlling quantity, following planned exits and avoiding a few oversized losses that can erase many ordinary wins. It cannot guarantee a particular win rate or average loss. A stop can fill worse than planned, so actual completed results—not just the intended stop distance—belong in this comparison.
Work Through Ten Trades
Suppose four trades gained $100.00 each and six lost $50.00 each, before costs.
| Result | Trades | Result per trade | Total |
|---|---|---|---|
| Wins | 4 | +$100.00 | +$400.00 |
| Losses | 6 | −$50.00 | −$300.00 |
| Entire sample | 10 | Average +$10.00 | +$100.00 |
The win rate is 4 ÷ 10 = 40%. The average result is $100.00 ÷ 10 = +$10.00 per trade. The same calculation can be written as 0.40 × $100.00 − 0.60 × $50.00 = $10.00.
This is the observed result of these ten trades. It is not a promise that the next trade, or the next ten, will earn that amount.
Costs Can Change The Answer
If each completed trade incurred $12.00 of total costs, the sample's costs would be $120.00. The net result becomes $100.00 − $120.00 = −$20.00, or −$2.00 per trade.
Use either net results throughout or a consistent calculation that subtracts costs once. Subtracting costs from already-net results counts them twice. The $12.00 figure is chosen for the example, not a claim about a broker's pricing.
Keep Breakeven Trades In The Sample
Return to the ten-trade example before costs. If an eleventh trade has a $0.00 result before costs, the total remains $100.00 but the average becomes $100.00 ÷ 11 = approximately $9.09. The win rate becomes 4 ÷ 11 = approximately 36.36%. Losses are 6 ÷ 11 and breakeven trades 1 ÷ 11; loss rate is not automatically one minus win rate when breakeven trades exist.
Compare Trades Taken With The Same Approach
State the period, costs and which completed trades belong to the sample. Mixing very different position sizes can make dollar averages reflect size changes as much as trade behavior. Results in R—units of each trade's original planned price risk—can help compare trades when that risk is recorded consistently.
A small sample can change sharply after one large win or loss. Look at the individual wins and losses, the circumstances and whether the same process was followed before treating its average as representative of future trading.