Trade analysis—be it in MT4 or MT5—is as important as the trade itself; anticipation of profitability is an electric tool almost neglected when evaluating trading strategies. The expectancy ratio gives any trader a bigger picture of trading results and states whether a trading system is profitable in the long run.
In this beginner’s guide, we will go through what the expectancy ratio is, why MT4 and MT5 users should care about it, and how to compute it by hand with your trading history. Whether you are a discretionary trader or rely heavily on automation through MetaConnector, this idea can help you make much better trading decisions.
An expectancy ratio tells you the average amount you expect to gain or lose with each trade. It gives you the realistic potential profitability of your strategy over a multitude of trades, rather than just one or two.
In simple words:
Expectancy Ratio = Average Win × Win Rate – Average Loss × Loss Rate
Here’s what each part means:
A positive expectancy ratio, therefore, means you stand to make money over time—even if you don’t win every trade.
Here is why the expectancy ratio is a better way of assessing an MT4 or MT5 trading strategy:
1. It gives you the full picture.
You could have a 70% win rate, but if your average loss is much bigger than your average win, you could still be losing money overall. The expectancy ratio considers both win/loss size and frequency.
2. Better Risk Management
Expectancy will help you choose a risk/reward ratio that fits your trading style. This is especially useful for setting up Expert Advisors (EAs) or automated strategies through MetaConnector for MT4/MT5.
3. Improves Your Strategy
Knowing your expectancy will help you to change a few parts of your strategy so as to boost overall profitability: reduce average loss, raise win rate, etc.
If you are using MetaTrader 4 or MetaTrader 5, calculating your expectancy ratio is quite easy. Here's a step-by-step manual:
Step 1: Get the trade data from MT4/MT5.
This report will summarize your trades in full and include information on total profit, loss, number of wins, and losses.
Step 2: Calculate Key Numbers
For an example calculation, the following must be assumed:
Let's calculate.
Step 3: Plug It into the Formula
Step 3: Plug It into the Formula
Expectancy Ratio = (₹1,000 × 0.60) – (₹700 × 0.40)
= ₹600 – ₹280
= ₹320
This would mean that, on average, a return of ₹320 is expected per trade. This is a strong indicator that your trading strategy is profitable.
If you have MetaConnector set up to copy trade, automate, or run your strategy on MT4/MT5, the process of monitoring expectancy and risk returns becomes much shorter.
MetaConnector will be especially valuable for those running Expert Advisors or the copy trading setup, for whom consistent performance tracking is of paramount importance.
The expectancy ratio is a very strong metric that should be known by any trader, manual or automated. It does not just tell you how many, but how much you make or lose per trade on average.
Whether you are manually trading on MT4/MT5 or using a smart tool like MetaConnector, calculating your expectancy ratio will enhance your ability to build a stronger, more consistent strategy.