Metrics

Win Rate & Expectancy

Win rate alone is misleading -- combine it with average win/loss to get expected value per trade.

What is Win Rate?

Win rate is the percentage of trades that made money. If your strategy executed 10 trades and 6 were profitable, the win rate is 60%.

Win Rate
win rate = (winning trades / total trades) * 100

A winning trade is any trade with a return greater than zero. A losing trade has a return less than zero. Trades that return exactly zero are counted separately as break-even trades.

Win rate alone is misleading
A strategy can win 80% of its trades and still lose money overall. A strategy can win only 30% of its trades and be highly profitable. What matters is not just how often you win, but how much you win when you win and how much you lose when you lose. That is what expectancy captures.
80% win rateExpectancy: -0.4% per trade0%30% win rateExpectancy: +1.0% per trade0%Wins often, loses bigLoses often, wins bigWinLoss
Strategy A wins 8 out of 10 trades but loses money overall. Strategy B wins only 3 out of 10 but is profitable. Win rate alone does not determine profitability.

What is Expectancy?

Expectancy is the average amount you can expect to gain or lose per trade. It combines win rate with the average size of wins and losses into a single number that tells you whether the strategy makes or loses money on a per-trade basis.

Expectancy
expectancy = (win rate * average win) + (loss rate * average loss)

In plain English: multiply how often you win by how much you win on average, then add how often you lose multiplied by how much you lose on average. The result is your expected profit or loss per trade.

Win rate and loss rate are expressed as decimals in the formula (for example, 80% win rate = 0.80, 20% loss rate = 0.20). Average win is a positive number and average loss is a negative number, so the second term subtracts from the first.

How Simula calculates these
Simula computes win rate, average win, average loss, and expectancy from the actual trade results in your backtest. Average win is the mean return across all winning trades (as a percentage). Average loss is the mean return across all losing trades (also as a percentage, and negative). Expectancy is reported per trade, in the same percentage units.

Worked Examples

80% win rate, negative expectancy

A strategy executes 10 trades. 8 are winners with an average gain of +1.5%, and 2 are losers with an average loss of -8.0%.

Win rate = 8 / 10 * 100 = 80%

Expectancy:

expectancy = (0.80 * 1.5) + (0.20 * -8.0)

expectancy = 1.2 + (-1.6)

expectancy = -0.4

Despite winning 80% of its trades, this strategy loses an average of 0.4% per trade. The 2 large losses (-8% each) more than wipe out the 8 small wins (+1.5% each).

30% win rate, positive expectancy

A strategy executes 10 trades. 3 are winners with an average gain of +8.0%, and 7 are losers with an average loss of -2.0%.

Win rate = 3 / 10 * 100 = 30%

Expectancy:

expectancy = (0.30 * 8.0) + (0.70 * -2.0)

expectancy = 2.4 + (-1.4)

expectancy = +1.0

Despite winning only 30% of its trades, this strategy gains an average of 1.0% per trade. The 3 large wins (+8% each) more than compensate for the 7 small losses (-2% each).

Reading Your Results

Win Rate

Win rate is shown as a percentage from 0% to 100%.

Win rate above 50%
More trades were profitable than unprofitable. This does not guarantee the strategy made money -- the losses could have been larger than the wins.
Win rate below 50%
More trades lost money than made money. This does not mean the strategy lost money overall -- the wins could have been larger than the losses.
Win rate of 0%
Every trade lost money or broke even. Expectancy will be zero or negative.
Win rate of 100%
Every trade was profitable. This is unusual and may indicate the strategy had very few trades or the backtest period was unusually favorable.

Expectancy

Expectancy is shown as a percentage per trade.

Positive expectancy
On average, each trade made money. The strategy has a mathematical edge -- if it continues to trade with similar win rates and win/loss sizes, it is expected to be profitable over time.
Negative expectancy
On average, each trade lost money. Over many trades, a negative expectancy strategy will lose money regardless of win rate.
Expectancy near zero
Wins and losses roughly cancel out on a per-trade basis. The strategy is close to break-even before any costs like commission and spread.

Things to Watch Out For

Win rate without context is meaningless

A 90% win rate sounds impressive but means nothing without knowing the average win and average loss sizes. A strategy that gains 1% on 9 trades and loses 20% on 1 trade has a 90% win rate and negative expectancy. Always look at win rate and expectancy together.

Few trades make both metrics unreliable

With only a handful of trades, a single outlier win or loss can dramatically shift the win rate and expectancy. A strategy that executed 5 trades has very different statistical reliability than one that executed 500. More trades produce more stable estimates of both win rate and expectancy. See Statistical Significance & Trade Count and Timeframes & Data for more on why backtest length and trade count matter.

Expectancy assumes future trades behave like past trades

Expectancy is calculated from the trades in the backtest. If market conditions change, the win rate and average win/loss sizes may change too, producing a different expectancy going forward. Walk-forward analysis tests whether your strategy's edge holds across different time periods rather than assuming the past will repeat.

Break-even trades are excluded from win rate

Trades that return exactly 0% are not counted as wins or losses. Simula reports them separately as break-even trades. However, break-even trades still count toward the total number of trades, so they lower both the win rate and the loss rate.

Leverage changes the numbers

If your strategy uses leverage, both the average win and average loss are amplified. A +2% win becomes +4% at 2x leverage, and a -2% loss becomes -4%. This changes the expectancy but not the win rate (the same trades win and lose, just by larger amounts). Simula calculates expectancy for each leverage level separately.

Related Metrics

Profit Factor -- the ratio of total profits to total losses. Expectancy tells you the average per-trade outcome; profit factor tells you the ratio of all gains to all losses.

Risk-Reward Ratio -- compares the average loss size to the average win size. Expectancy combines this ratio with win rate to produce a single expected-value figure.

Total and Annualized Return -- the overall result of the strategy. Expectancy explains the per-trade mechanics behind the total return.