Expected Value Calculator

Understanding Expected Value in Trading

Expected Value (EV) is the average amount you can expect to win or lose per trade over the long run. It's one of the most important concepts in trading because it tells you whether your strategy has a mathematical edge.

The Expected Value Formula

Or in terms of Risk:Reward ratio:

What Does Expected Value Tell You?

• Positive EV (+): Your strategy makes money over time. You have an edge.
• Zero EV (0): You break even over time. No edge.
• Negative EV (-): Your strategy loses money over time. You're giving away your edge.

Real World Example

Let's say you have:

• Win Rate: 40%
• Risk:Reward: 2:1
• Risk per trade: ₹100

Calculation:

• When you win (40% of the time): You make ₹200 (2 × ₹100)
• When you lose (60% of the time): You lose ₹100
• EV = (0.40 × ₹200) - (0.60 × ₹100) = ₹80 - ₹60 = +₹20 per trade

Over 100 trades, you'd expect to make around ₹2,000!

Why Expected Value Matters More Than Win Rate

Many traders obsess over win rate, but EV is what actually matters. Consider these two traders:

• Trader A: 70% win rate, 1:1 R:R → EV = +₹0.40 per trade
• Trader B: 40% win rate, 3:1 R:R → EV = +₹0.80 per trade

Trader B makes TWICE as much despite a much lower win rate! This is the power of risk:reward ratio.

How to Use This Calculator

• Select your preferred currency (₹ INR or $ USD)
• Input your historical or expected win rate
• Enter your typical risk:reward ratio
• Set your risk per trade (amount)
• Choose number of trades to project
• Add your account size to see ROI percentage
• Review the expected value and total returns

Interpreting Your Results

• EV Per Trade > 0: You have positive expectancy. Keep trading this strategy.
• Total Expected Return: What you'll likely make over your specified number of trades.
• Breakeven Win Rate: The minimum win rate needed to break even with your current R:R.
• Scenario Analysis: Shows best case, expected case, and worst case outcomes based on statistical variance.

Important Considerations

• Variance: Even with positive EV, you'll have winning and losing streaks. The chart shows your likely range.
• Sample Size: You need at least 30-50 trades to have confidence in your statistics.
• Consistency: Your actual R:R and win rate must be consistent for EV to be meaningful.
• Costs: Remember to factor in commissions, spreads, and slippage which reduce your actual EV.
• Compounding: This calculator shows linear returns. Actual returns will differ if you're compounding.

How to Improve Your Expected Value

• Increase R:R Ratio: Let winners run longer, cut losers faster
• Improve Win Rate: Better entry timing, wait for higher probability setups
• Reduce Risk Per Trade: Trade smaller to survive variance
• Better Trade Selection: Only take A+ setups that meet all criteria
• Eliminate Mistakes: Revenge trading, FOMO, and emotional trades all reduce EV

The Bottom Line

Expected Value is the single most important metric in trading. If your EV is positive, you will make money over time if you maintain discipline and manage risk properly. If your EV is negative or zero, you need to fix your strategy before continuing to trade real money.

Remember: In trading, you don't need to win most of the time. You just need your wins to be bigger than your losses often enough to have positive expected value.