What is R-expectancy in trading?
R-expectancy is the average profit or loss a trading strategy makes per trade, measured in units of risk (R), where 1R is the amount you risk from entry to your stop-loss. An R-expectancy of 0.30R means the strategy makes, on average, 0.30 times the amount it risks on each trade. It is a measure of the expected return of a trading strategy, expressed per unit of risk rather than in currency.
| R-expectancy | Interpretation | Over 100 trades (risking 1R each) |
|---|---|---|
| 0 or below | Negative edge — the strategy loses money | Net loss |
| 0.00 – 0.10 | Marginal — fragile to costs and slippage | +0 to +10R |
| 0.10 – 0.25 | A solid, tradeable edge | +10 to +25R |
| 0.25 – 0.50 | Strong | +25 to +50R |
| Above 0.50 | Exceptional — check for overfitting | +50R and up |
The R-expectancy formula
R-expectancy = (Win rate × Average winning R-multiple) − (Loss rate × Average losing R-multiple)
An R-multiple is a trade’s result expressed in units of the initial risk: a trade that makes twice what you risked is +2R, and a trade stopped out at your initial stop is −1R. If your losses always close at the initial stop, the average losing R-multiple is simply 1R.
Worked example
Suppose a strategy produces the following six trades, measured in R: +2R, −1R, +1.5R, −1R, +3R, −1R. The total is +3.5R over 6 trades, so:
R-expectancy = 3.5R / 6 trades ≈ 0.58R per trade.
Over 100 trades risking 1R each, that expectancy would be worth roughly +58R before costs — a strong result you would still confirm out-of-sample and in live trading.
Frequently asked questions
What is a good R-expectancy value?
Any R-expectancy above 0 is a positive edge. Around 0.10–0.25R is a solid, tradeable edge, 0.25–0.50R is strong, and above 0.50R is exceptional — and worth double-checking for overfitting.
How do you calculate R-expectancy?
Express each trade’s result in R-multiples and take the average, or use the formula (win rate × average winning R) − (loss rate × average losing R). Both give the expected result per trade in units of risk.
What is the difference between R-expectancy and win rate?
Win rate only measures how often you win. R-expectancy also accounts for how big your wins and losses are, so it reflects the strategy’s actual edge — not just its hit rate.
Can a low-win-rate strategy have positive R-expectancy?
Yes. A trend-following strategy might win only 40% of its trades yet have strong positive R-expectancy if its winners are much larger than its 1R losers. That is the whole point of measuring expectancy in R rather than in win rate.
What is the difference between R-expectancy and profit factor?
R-expectancy is a per-trade figure in units of risk, while profit factor is the ratio of gross profit to gross loss across all trades. They describe the same edge from different angles and are best read together.
Read R-expectancy alongside the Sharpe ratio, profit factor, Z-score and CAGR and the System Quality Number (SQN). See how these metrics play out on real money in our monthly live trading portfolio updates.
