Win rate, profit factor and expectancy: what each one tells you
The numbers every trading journal should track, how to calculate them, and why you need to read them together instead of trusting any one.
The short version
| Metric | The question it answers | How it is calculated |
|---|---|---|
| Win rate | How often do I win? | Winning trades / all trades |
| Average win and average loss | How big are my wins and losses? | Total of wins / number of wins, and the same for losses |
| Payoff ratio | Are my wins bigger than my losses? | Average win / average loss |
| Profit factor | How much do I make per unit I lose? | Gross profit / gross loss |
| Expectancy | What does one trade earn on average? | Win rate x average win, minus loss rate x average loss |
| R multiple | How did the trade do versus what I risked? | Profit or loss / amount risked |
| Max drawdown | How deep was my worst losing stretch? | Biggest fall from a peak to the next low |
No single number is enough. Win rate alone can look great while you lose money, and profit factor alone can come from three lucky trades. Read them together.
Win rate
Win rate is the share of trades that closed in profit. A 60% win rate sounds good, but it says nothing about how much you win or lose when you are right or wrong. A trader who wins small and loses big can win 8 trades in 10 and still go broke.
Average win, average loss and payoff ratio
Divide your average win by your average loss to get the payoff ratio. It decides how often you need to win to break even: the break-even win rate is 1 / (1 + payoff ratio).
| Payoff ratio | Win rate needed to break even |
|---|---|
| 0.5 (wins half the size of losses) | 66.7% |
| 1.0 | 50.0% |
| 2.0 (wins twice the size of losses) | 33.3% |
| 3.0 | 25.0% |
Profit factor
Profit factor is gross profit divided by gross loss. Above 1.00 you made more than you lost, and 1.00 is break-even. If you made $2,000 on winning trades and lost $1,000 on losing ones, your profit factor is 2.00. It is only as reliable as the number of trades behind it: a profit factor of 3 over eight trades means very little.
Expectancy
Expectancy is the average result of one trade. The formula is win rate x average win minus loss rate x average loss. A positive number means your approach has earned money per trade so far, and multiplying it by your trades per month gives a rough sense of scale. It is the single most useful number here because it combines win rate and trade size.
A worked example: why win rate misleads
Two traders each take 100 trades.
| Trader A | Trader B | |
|---|---|---|
| Win rate | 80% | 40% |
| Average win | $10 | $60 |
| Average loss | $60 | $30 |
| Payoff ratio | 0.17 | 2.00 |
| Profit factor | 0.67 | 1.33 |
| Expectancy per trade | -$4.00 | +$6.00 |
| Result over 100 trades | -$400 | +$600 |
Trader A wins four trades in five and still loses money, because the losses are six times the size of the wins. Trader B loses more often than not and makes money. Looking at win rate alone, you would pick the wrong trader.
R multiples
If you decide before a trade how much you will risk (your stop loss distance times size), you can express the result as a multiple of that risk. Making $90 on a trade that risked $40 is +2.25R, and a full stop-out is -1R. Averaging R multiples lets you compare trades of different sizes and instruments, and the average R is your expectancy in R. The free template calculates this when you fill in the risk column.
Max drawdown
Max drawdown is the largest fall from a peak to the next low, in money or percent. It shows how bad the bad stretches get, which tells you whether you could actually stay with your approach through one. Recovery is also lopsided: after a 50% loss you need a 100% gain to get back to even.
How many trades do you need?
Metrics from a handful of trades are mostly noise. As rough rules of thumb, treat under about 30 trades as a hint, and look for 100 or more before trusting a pattern. Keep conditions comparable too: one strategy, one market type, and the same rules.
Where to get these numbers
- Type your trades into the free MT5 journal template, which calculates every metric above.
- Or let AI Trading Journal record your closed trades into Notion automatically. Its dashboard shows your win rate, profit factor and cumulative and daily P&L from your real MT5 history.
This guide explains record keeping and statistics. It is not trading or investment advice.
Related guides
- How to journal MT5 trades in Notion automatically
- MT5 to Notion: Expert Advisor vs a standalone app
- An MT5 trading journal with no subscription
- How to track MT5 trades automatically
- What an MT5 trading journal should record
- Free MT5 trading journal template (Excel and Sheets)
- A weekly trading review in 20 minutes
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