Most trading metrics are simple arithmetic that get quoted without their context. Win rate gets worshipped; expectancy gets ignored. This page defines the seven that matter, in the order they build on each other — so by the end, "is a 45% win rate good?" has an actual answer.
The one that misleads
Win rate is the most-quoted and least-useful number alone. A 30% win rate can be highly profitable; a 70% win rate can lose money. What's missing is the size of wins versus losses.
The one that decides
Expectancy ties win rate and trade size together into a single number: the average dollar result you can expect per trade. Positive expectancy is the definition of an edge.
On this page:Win rate · Risk/reward (R) · Breakeven win rate · Average win / average loss · Expectancy · Profit factor · Drawdown
Win rate
The share of trades that closed profitable: wins ÷ total trades. A 45% win rate means 45 of every 100 trades closed green.
On its own, win rate says nothing about whether you make money. It only matters next to the size of your wins and losses. A trader who wins 30% of the time but whose winners are four times their losers is profitable; a trader who wins 70% of the time but lets losers run twice the size of winners is not. Chasing a high win rate in isolation is the most common way traders talk themselves into cutting winners early and holding losers — see the disposition effect.
Risk/reward ratio (R)
The potential reward of a trade divided by the amount risked. If you risk $100 to make $200, that is a 1:2 risk/reward, or a 2R target — "R" is one unit of risk.
Expressing outcomes in R normalizes trades of different sizes: a +2R win and a −1R loss are comparable whether you risked $50 or $500. Thinking in R is what lets the next three metrics work. Plan it before entry with the risk/reward calculator, and size the position with the position size calculator.
Breakeven win rate
The win rate you need just to break even at a given risk/reward. The formula is 1 ÷ (1 + reward/risk):
- At 1:1 you need to win 50% of the time to break even
- At 1:2 you need 33%
- At 1:3 you need 25%
This is the number that makes win rate make sense. A 40% win rate sounds like losing — until you notice that at 1:2 risk/reward, breakeven is 33%, so 40% is comfortably profitable. The risk/reward calculator shows the breakeven line for any ratio.
Average win / average loss (payoff ratio)
The mean size of your winning trades divided by the mean size of your losing trades. A 2:1 payoff ratio means your average winner is twice your average loser.
Payoff ratio is the partner of win rate. Together they determine whether you make money: a high payoff ratio lets a sub-50% win rate profit, while a low one demands a high win rate to survive. It is also the metric the disposition effect quietly destroys — cutting winners early and holding losers shrinks the average win and inflates the average loss at the same time.
Expectancy
The average amount you can expect to win or lose per trade across many trades. It folds win rate and payoff into one number:
Expectancy = (win rate × average win) − (loss rate × average loss)
Worked example: a 40% win rate, an average win of $300, and an average loss of $150 gives (0.40 × $300) − (0.60 × $150) = $120 − $90 = +$30 per trade. Over 200 trades, that is roughly $6,000 of expected edge — even though the trader loses 60% of the time. Positive expectancy is the definition of a trading edge; everything else is a means to it. The longer read is what is a trading edge.
Profit factor
Gross profit divided by gross loss — total won ÷ total lost across all trades. Example: $6,000 made on winners against $4,000 lost on losers is a profit factor of 1.5.
Above 1.0 is profitable. Around 1.5 is solid; 2.0 is strong; much above that over a small sample usually means the sample is too small to trust. Profit factor is a quick health check on a block of trades — settle the dollars with the P&L calculator — but like every ratio here, it is only as honest as the number of trades behind it.
Drawdown
The peak-to-trough decline in account equity, as a percentage of the peak. A 20% drawdown means equity fell 20% from its high-water mark.
Drawdown matters more than most traders price in, because recovery is multiplicative, not additive: a 20% drawdown needs a 25% gain to recover, a 50% drawdown needs 100%, and a 90% drawdown needs 900%. The full math, and the four levers that bound how deep a drawdown goes, are in the drawdown recovery math.
How they fit together
The metrics are a chain. Risk/reward sets the breakeven win rate. Your actual win rate and payoff ratio determine whether you clear it. Expectancy turns all of that into a single per-trade number, profit factor sanity-checks it over a block of trades, and drawdown measures the damage when the edge goes quiet for a while.
The catch is sample size. Every number here is an estimate, and a handful of trades cannot support a confident one — which is why Kyra's engine attaches a sample size and a confidence range to every figure it reports, and tiers each claim (Tracking, Hint, Signal, Proven) by how much evidence stands behind it. A metric without its sample size is a guess wearing a decimal point. For how many trades it takes before these stabilize, see how many trades before patterns emerge.
Educational only. Not financial or trading advice. Formulas are standard definitions; the worked examples use illustrative figures, not performance data.
