Expectancy & R multiples

R is the unit that makes trades comparable. One R is the amount you risked on a trade. A trade that made twice what you risked is +2R; a trade stopped out is −1R; a trade closed early for a scratch is around 0R. Once everything is expressed in R, a micro-lot trade and a full-size trade sit in the same column, and account growth stops distorting the record.

Expectancy is the average R per trade: multiply win rate by average win in R, subtract loss rate by average loss in R. A strategy winning 40% of the time with average winners of +2.5R and losers of −1R has an expectancy of (0.4 × 2.5) − (0.6 × 1) = +0.4R per trade. Positive expectancy is the definition of an edge; everything else is commentary.

This reframes the win rate entirely. A 40% win rate is not a problem to fix — it is a normal profile for a trend-following approach with large winners. Conversely, a 75% win rate with average losers of −3R and winners of +0.5R has an expectancy of (0.75 × 0.5) − (0.25 × 3) = −0.375R and will destroy an account slowly while feeling wonderful. Frequency of being right is not the measure.

A 75% win rate can quietly destroy an account. Frequency of being right is not the measure — expectancy is.

Expectancy also tells you what your bad runs will look like. With 0.4R per trade over 100 trades you expect roughly +40R, but the path will contain long flat stretches and drawdowns of several R. Knowing the expected shape is what allows you to keep executing during the stretch where the equity curve is doing nothing.

Compute expectancy per setup, not just for the account. Most traders discover that one setup carries the entire result and one or two others quietly consume it — usually the ones taken out of boredom. Cutting a negative-expectancy setup is the fastest improvement available to most intermediate traders, and it requires no new skill at all.