In this guide
The basic equationInputs are doing all the workAverage values hide distributionsCosts and changing conditionsThe basic equation
Multiply win probability by average win, then subtract loss probability multiplied by average loss. If wins average 2R, losses average 1R and the assumed win rate is 45%, the modeled expectancy is +0.35R.
Inputs are doing all the work
A calculator cannot know whether your assumed win rate is realistic. Small changes to win rate or payoff size can materially change expectancy, especially near the break-even point. Treat the result as a property of the assumptions, not a property of the market.
Average values hide distributions
Two strategies can have the same average win and loss while producing very different sequences and tail outcomes. Expectancy compresses a distribution into one number and therefore cannot describe path risk, drawdowns or rare events.
Costs and changing conditions
If historical results are used to estimate inputs, costs and regime changes matter. A positive gross expectancy can become negative after frictions. PreBreakout intentionally does not import backtest data or claim predictive performance.
Compare profit factor with expectancy →