The two metrics complete each other
Win rate tells you "how often you’re right." Risk-reward tells you "how much you make when right versus how much you lose when wrong." Neither one alone reveals a strategy’s real profitability.
The expected value formula
Expected value = (win rate × average win) − (loss rate × average loss)
For example, with a 40% win rate, average win of 2, average loss of 1: (0.4 × 2) − (0.6 × 1) = 0.8 − 0.6 = +0.2. Even with a win rate under half, this is a long-term positive-expectancy strategy.
Comparing two real examples
- Strategy A: 75% win rate, 1:0.5 ratio → EV = (0.75×0.5) − (0.25×1) = 0.375 − 0.25 = +0.125
- Strategy B: 35% win rate, 1:3 ratio → EV = (0.35×3) − (0.65×1) = 1.05 − 0.65 = +0.4
- By win rate alone, A looks much better — but B’s expected value is over three times higher
Check your own strategy’s expected value
Calculate your average win rate and average risk-reward from your journal data, then plug them into this formula. It tells you, in hard numbers, whether what you’re currently doing has a statistical long-term edge.
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