Expectancy: the one number that matters more than win rate

[Shadow Trader]

Expectancy tells how much a trade is worth on average. The formula is simple: win rate times average win, minus loss rate times average loss.

A scalper winning seventy percent with an average win of 3 pips and an average loss of 8 pips has expectancy of 0.7 times 3 minus 0.3 times 8, which is 2.1 minus 2.4, so negative 0.3 pips per trade. A high win rate, and still a losing system.

Meanwhile, a scalper winning forty percent with an average win of 6 pips and an average loss of 3 pips has 0.4 times 6 minus 0.6 times 3, which is 2.4 minus 1.8, a positive 0.6 pips per trade.

Costs matter enormously. Subtract spread and commission from each trade before computing the average win and loss, and the numbers shift. A positive expectancy of 0.3 pips on paper can vanish after 0.5 pips of costs.

The measurement needs a decent sample, at least a few hundred trades. Anything less is noise, and the number can swing wildly with a handful of outcomes.

What's the current expectancy per trade after costs, and how many trades support it?