Expectancy in plain English: how a losing week can still be a winning system

“What's your win rate?” is the wrong first question. A trader who wins 40% of the time can beat one who wins 70% — and the reason is a single number almost no beginner tracks: expectancy, the average amount you make per trade over many trades.

Two levers, one number

Expectancy is set by two things that trade off against each other:

• Win rate — how often you win.
• Reward-to-risk — how big your average winner is versus your average loser.

That trade-off is the liberating part. You don't have to be right often if your winners are big enough.

The maths that surprises people

Say you win just 40% of the time, but your average winner is three times your average loser. Out of 10 trades:

• 4 wins × 3 = +12
• 6 losses × 1 = −6
• Net: +6 over 10 trades — a positive expectancy, despite losing more often than you win.

You could have a red week inside a system that makes money over a year.

Now flip it. A 70% win rate feels great, but if your losers are four times your winners, the maths turns negative — the occasional big loss eats all the small wins. High win rate, losing system. This is exactly how “I'm right most of the time” traders blow up.

The numbers, not your feelings, tell you whether a process works. There are only two ways to improve it: win a bit more often, or make winners bigger and losers smaller.