How it works
Expectancy is the average result per trade, measured in R (1R = what you risk). It combines your win rate with the size of your average win.
The break-even win rate is the win rate you need at a given reward-to-risk just to stay flat. Above it you make money over many trades.
Losing streaks are normal even for good systems. The table shows how much a streak takes from the account and the chance of seeing it in your number of trades.
Expectancy (R) = Win rate ร Average win (R) โ (1 โ Win rate) Break-even win rate = 1 รท (1 + Reward : risk)
Example
Win rate 45% with an average win of 2R: 0.45 ร 2 โ 0.55 = +0.35R per trade. The break-even win rate at 1:2 is 33.3%. At 1% risk, 10 losses in a row leave about 90.4% of the account (a 9.6% drawdown).
Questions
What is a good expectancy?
Anything above zero over a large sample is an edge. +0.2R to +0.5R per trade is solid for most discretionary traders.
Why do losing streaks matter?
With a 45% win rate, 7 losses in a row in 100 trades is likely. If you risk too much per trade, a normal streak can break your account or your discipline.
Where do I get my win rate?
From a trading journal or a backtest of at least 50โ100 trades. Don't guess: a few points of win rate change the expectancy a lot.