Expectancy is the average amount of money (or R) a trading strategy is expected to make or lose per trade, calculated from its win rate, average win, and average loss. It compresses an entire track record into one number: positive expectancy means the strategy has an edge; negative expectancy means it loses money over time, however it feels trade to trade.
Expectancy matters because win rate and win size mean nothing in isolation. A strategy that wins only 30% of the time can be very profitable if its winners are several times larger than its losers, while a 70%-win-rate strategy can bleed money if its rare losses are large. Expectancy is the number that settles the argument.
It is only trustworthy on a meaningful sample. Computed over ten trades it is mostly noise; over a few hundred it starts to describe the strategy rather than luck. Quoting expectancy in R-multiples instead of dollars makes strategies comparable across account sizes.
A strategy wins 40% of the time with a $150 average win and an $80 average loss: (0.40 × $150) − (0.60 × $80) = $60 − $48 = +$12 expected per trade.