Optencis
Expectancy is the average amount a method makes or loses per trade, over a large number of trades. It is the single number that answers the question every trader asks and few measure: does this actually work? A method with a positive expectancy makes money over time if it is traded at a size that survives its losing streaks. A method with a negative expectancy loses money over time whatever the size, and no amount of discipline changes that. Here is how to calculate it, for binary options and for forex, and how many trades you need before the number means anything.
Expectancy also settles arguments that feelings cannot. A method that wins 7 trades out of 10 can lose money; a method that wins 4 out of 10 can make it. The win rate alone says nothing until you know what a win pays and what a loss costs.
The formula for binary options
In a binary option, a win pays the payout rate, say 90%, and a loss costs 100% of the amount. For each dollar invested:
Expectancy = (win rate × payout) − (loss rate × 1)
| Win rate | Expectancy per $1 at 90% payout | Expectancy per $1 at 80% payout | Over 100 trades of $10 |
|---|---|---|---|
| 50% | −$0.050 | −$0.100 | −$50 / −$100 |
| 52.6% | $0.000 | −$0.053 | $0 / −$53 |
| 55% | +$0.045 | −$0.010 | +$45 / −$10 |
| 58% | +$0.102 | +$0.044 | +$102 / +$44 |
| 60% | +$0.140 | +$0.080 | +$140 / +$80 |
The row where expectancy is zero is the break-even win rate, 1 ÷ (1 + payout). Everything above that line is an edge; everything below is a cost. Notice how much the payout matters: the same 55% trader makes money at 90% and loses it at 80%. Checking the payout before each trade is not pedantry.
The formula for forex and CFDs
Here wins and losses have different sizes, so you need the average of each:
Expectancy = (win rate × average win) − (loss rate × average loss)
A trader who wins 40% of the time with an average win of $30 and an average loss of $12 has an expectancy of 0.4 × 30 − 0.6 × 12 = $12 − $7.20 = +$4.80 per trade. A trader who wins 70% of the time with an average win of $8 and an average loss of $25 has 0.7 × 8 − 0.3 × 25 = $5.60 − $7.50 = −$1.90 per trade. The second trader feels much better and loses money. The position size calculator keeps the average loss where you decided it should be, which is half of this equation.
How many trades before the number means anything
Expectancy measured on 20 trades is noise. With a true win rate of 55%, a run of 20 trades will show anything from 35% to 75% quite often. The table gives the range you should expect to see purely by chance:
| Trades in the sample | Observed win rate, true rate 55%, 95% of the time |
|---|---|
| 20 | 33% to 77% |
| 50 | 41% to 69% |
| 100 | 45% to 65% |
| 300 | 49% to 61% |
| 1,000 | 52% to 58% |
At 100 trades you can tell a 55% method from a 45% one, roughly. You cannot yet tell 55% from 52%, which at a 90% payout is the difference between an edge and a slow loss. Measure over at least 100 trades before any conclusion, and keep measuring. This is why the journal is not optional and why our article on the demo account asks for 100 trades above break-even before real money.
Reading expectancy from your journal
- Filter by setup. One expectancy per setup, not one for the whole account. A good method often hides a bad setup, and the number finds it.
- Filter by hour and asset. The same setup can have a positive expectancy at 14:00 UTC and a negative one at 20:00 UTC. Our article on the best hours to trade explains why.
- Separate planned and unplanned trades. Most journals show a positive expectancy on planned trades and a clearly negative one on the rest. That gap is the cost of indiscipline, in dollars.
- Use the actual payout of each trade, not an assumed 90%. Payouts vary by asset, duration and time of day.
What expectancy does not tell you
A positive expectancy says the method makes money on average over many trades. It says nothing about the next trade, the next ten, or the order in which wins and losses arrive. A method with +$0.10 per dollar can and will produce seven losses in a row, as our article on losing streaks shows. Expectancy tells you whether to keep trading the method; trade size, 1% to 2% as in our drawdown article, decides whether you are still there when the average asserts itself. The two numbers work together, and neither replaces the other.
Frequently asked questions
What is a good expectancy for binary options?
Anything reliably above zero after 100 or more trades is an edge. In practice, +$0.05 to +$0.15 per dollar invested, which corresponds to a win rate of 55% to 60% at a 90% payout, is what disciplined traders with a tested method report. Higher figures over small samples are usually luck.
Can I have a high win rate and still lose money?
Yes. In binary options, any win rate below the break-even for your payout loses money: 52.6% at a 90% payout, 55.6% at 80%. In forex, a high win rate with large average losses and small average wins loses money too.
How often should I recalculate my expectancy?
Every 50 trades, on the last 100 to 200 trades. A rolling window shows whether the method is drifting as the market changes, without reacting to a single bad week.
Binary options and leveraged products are high-risk: you can lose all the money you invest. Read our binary options guide and our risk disclosure before trading.
