Trading Psychology
Win Rate vs. Expectancy: What Actually Matters
A 40% win rate can be more profitable than a 70% win rate — if the average winner is significantly larger.
Key rules
- Expectancy = (win rate × avg win) − (loss rate × avg loss)
- A low win rate with large wins can outperform a high win rate
- Don't assess your edge on fewer than 100 trades
- A losing streak is expected — it doesn't mean your edge is broken
- Track both win rate and average R separately in your journal
Many traders obsess over win rate, but expectancy — (win rate × average win) minus (loss rate × average loss) — is what determines profitability. A system winning 40% of the time with 3:1 R:R has higher expectancy than one winning 70% with 0.5:1.
Understanding this allows you to accept losing streaks calmly. Six consecutive losses at 40% win rate is statistically normal.