Two components
Expectancy combines winning frequency and gain size with losing frequency and loss size. In a sample it is net outcome divided by trades. Record initial-risk units as well as money to reveal position-size changes.
Breakeven is not probability
Constant 2 R wins and 1 R losses require more than one-third wins to profit before costs. This threshold does not tell you whether a strategy will achieve it. A model probability is a different estimate that depends on data and assumptions.
Samples and costs
A positive average over a few trades may vanish in another period. Include all costs, identify open positions and examine extreme outcomes. Keep rule-fitting data separate from validation data; multiple variants of one history are not independent evidence.
Illustrative example
In 100 trades, 40 win 2 R and 60 lose 1 R: net 20 R, average 0.20 R. An additional 0.10 R cost per trade reduces the average to 0.10 R. This is arithmetic, not AIM's expected performance.
Review checklist
- Record each trade's initial risk.
- Use net outcomes and a defined period.
- Separate breakeven threshold from estimated probability.
- Check stability on subsequent data.