How do you know you’ll make money in the long run trading forex, stocks, or crypto? It’s a simple question—yet one most traders never answer.
This question matters because once you know how you make money over time, you naturally start trading in a way that supports that outcome. More importantly, it brings peace. Even during drawdowns, you remain calm knowing the math is on your side.
That math is captured in one word: expectancy.
Expectancy tells you what you can expect to make, on average, every time you take a trade. It’s calculated from your past performance or from a backtest:
Expectancy = (Win Rate x Average Win) - (Loss Rate x Average Loss)
If expectancy is positive, you’ll make money in the long run—the higher it is, the better. A positive expectancy simply means your wins outweigh your losses statistically, not that you win every trade.
Expectancy is tightly linked to your trading system: your strategy and your risk per trade. In theory (backtesting), expectancy always looks straightforward. In practice, emotions, mistakes, and inconsistency creep in. Your job as a trader is to get your real performance as close as possible to your theoretical expectancy.
Ways to improve expectancy:
- Trade a strategy with a clear edge (aiming for a 40% win rate or above with proper risk management should be fine)
- Make sure wins are larger than losses—use a fixed stop loss and aim for at least a 3:1 reward-to-risk ratio.
- Let your winners run to target.
- Apply the same risk consistently on every trade.
- Trade your edge relentlessly—don’t abandon it during losing streaks.
- Avoid overtrading; chasing quick gains often leads to emotional mistakes and losses.
In the end, every single trade outcome is random. You can’t control whether the next trade wins or loses. What you can control is execution, risk, and consistency. Do that long enough with a proven edge, and positive expectancy will take care of the rest.
