Expectancy and profit factor: the two numbers that tell you if a strategy works

Win rate is the number everyone quotes, and it tells you almost nothing on its own. A strategy that wins 70% of the time can lose money; one that wins 35% can make plenty. Two other numbers answer the real question, "does this make money?": expectancy and profit factor.

Expectancy: the average result per trade

Expectancy = (total profit − total loss) ÷ number of trades

Or in its longer form:

Expectancy = win rate × average win − loss rate × average loss

It's the amount you make (or lose) per trade on average. Positive means the strategy has paid; negative means it hasn't.

Profit factor: how much you win for each dollar lost

Profit factor = total of all winning trades ÷ total of all losing trades

A profit factor of 1.5 means you made $1.50 for every $1 you lost. Anything above 1 is profitable; below 1 is losing.

A worked example

Twenty trades:

• 8 wins averaging $30 → $240 in total
• 12 losses averaging $15 → $180 in total

Number	Calculation	Result
Win rate	8 ÷ 20	40%
Profit factor	240 ÷ 180	1.33
Expectancy	(240 − 180) ÷ 20	+$3.00

A 40% win rate sounds poor, but the strategy made money because the wins were twice the size of the losses.

Measure it in R too

Dollar expectancy depends on your position size. Expectancy in R (multiples of what you risked) lets you compare strategies and periods fairly. If you risked $15 a trade in the example above, +$3 per trade is +0.2R. See what is an R-multiple.

What good numbers look like

There are no universal targets, but as a rough guide:

• Profit factor under 1.0 is losing; 1.0–1.3 is thin, and costs or a bad month can erase it; around 1.5 or more is solid for most discretionary strategies.
• Expectancy should be clearly positive after fees and funding. A tiny positive expectancy before costs often turns negative after them (see maker vs taker fees).

Why sample size matters

Twenty trades is a small sample. A lucky streak can make a weak strategy look great, and an unlucky one can make a good strategy look broken. Treat numbers from fewer than 30 trades per setup as a first impression, not a verdict.

Where win rate fits

Win rate isn't useless; it shapes how a strategy feels. Low win rates mean long losing streaks, which are hard to sit through. But on its own it can't tell you whether you're making money. Always read it together with the size of your average win and loss. The risk-reward ratio guide shows the break-even win rate for any ratio, and the risk-reward calculator works out expectancy for a planned trade.

Break it down

The most useful view is expectancy and profit factor per setup, per emotion and per asset. A strategy that's barely profitable overall often hides one setup that pays well and another that loses steadily. Drop the loser and the whole picture changes.

TradeTurtle's stats show win rate, profit factor, expectancy and average R for all your closed trades, and break results down (trades, win rate, P&L and average R) by setup, emotion, direction and asset.