Question 1

What is expectancy in trading?

Accepted Answer

Expectancy is the average amount a set of rules won or lost per trade across the whole test. It combines how often you win with how big the wins and losses are, so a positive expectancy means the average trade added to the account and a negative one means it drained it.

Question 2

What is profit factor?

Accepted Answer

Profit factor is the total money won divided by the total money lost across all trades. Above 1 means the wins outweighed the losses, below 1 means they did not, and the further above 1 it sits, the more cushion the strategy had.

Question 3

Which matters more, win rate or expectancy?

Accepted Answer

Expectancy is the more honest number because it accounts for the size of wins and losses, not just how often you win. A high win rate can still produce negative expectancy if the rare losses are large.

Question 4

Can profit factor be misleading?

Accepted Answer

Yes. A few unusually large winning trades can lift profit factor well above 1 even if the strategy is fragile, so it should be read alongside trade count, expectancy, and drawdown rather than on its own.