BACKTESTING · METRICS

Crypto Strategy Profit Factor vs Expectancy: Read Both With Costs

Profit factor and expectancy summarise the same trades differently. Read both, and read them after costs.

Short answer

Profit factor = gross profit ÷ gross loss; above 1 means winners outweigh losers in total. Expectancy = average profit per trade = (win rate × average win) − (loss rate × average loss). Profit factor ignores how many trades it took; expectancy tells you what each trade earns, which you can compare with per-trade costs. A strategy with profit factor 1.3 and expectancy of 4 bps per trade may disappear after 6 bps of costs. Always compute both after fees, slippage and funding.

Definitions

MetricFormulaTells you
Profit factorGross profit ÷ gross lossOverall balance of winners vs losers
ExpectancyWin% × avg win − loss% × avg lossAverage earnings per trade
Expectancy (R)Expectancy ÷ average riskEarnings per unit of risk

Worked example

Illustrative: 200 trades, 45% winners averaging +1.2%, 55% losers averaging −0.8%. Gross profit = 90 × 1.2 = 108; gross loss = 110 × 0.8 = 88. Profit factor = 1.23. Expectancy = 0.45 × 1.2 − 0.55 × 0.8 = 0.10% per trade (10 bps). Round-trip costs of 8 bps leave 2 bps; costs of 12 bps turn it negative.

Illustrative expectancy per trade after costs (bps)Illustrative expectancy per trade after costs (bps): Before costs +10 bps; After 8 bps +2 bps; After 12 bps -2 bps.ILLUSTRATIVE EXPECTANCY PER TRADE AFTER COSTS (BPS)Before costs+10 bpsAfter 8 bps+2 bpsAfter 12 bps-2 bps
Per-trade expectancy must exceed per-trade costs. Original ChartsPod editorial graphic.

Reading them together

Metric reviewMetric review: Both metrics after costs; Expectancy vs per-trade cost; Profit factor without top trades; Number of trades; Max drawdown alongside.METRIC REVIEWBoth metrics after costsExpectancy vs per-trade costProfit factor without top tradesNumber of tradesMax drawdown alongside
A good profit factor with tiny expectancy is fragile. Original ChartsPod editorial graphic.

Related: Crypto Risk-Reward After Fees: Calculate the Real Break-Even Win Rate, Trading Journal Expectancy: Include Fees, Funding and Partial Exits, A Profitable Crypto Backtest With 20 Trades: Is the Sample Useful?.

Expectancy in R

Expressing expectancy in units of risk (R) makes strategies comparable across markets and position sizes. If average risk per trade is 1% of capital and expectancy is 0.15%, expectancy is 0.15R. A strategy earning 0.15R per trade with 300 trades a year has a very different profile from one earning 0.5R with 30 trades; drawdowns, costs and variance differ too.

Conclusion

Report profit factor and expectancy after costs, and require expectancy to clear per-trade costs with margin.

Check metrics after setting costs in the backtester.

Open the ChartsPod terminal

Check Crypto Strategy Profit Factor vs Expectancy against a live market before relying on it.

Try it in ChartsPod

Questions readers ask

What is a good profit factor?

Above 1 after costs; how much above depends on trade count and stability.

What is expectancy?

Average profit per trade.

Why compute after costs?

Small per-trade edges are easily erased by fees and slippage.

Sources and methodology

Backtesting principles follow TradingView's Pine Script documentation on strategies, repainting and non-standard charts, and ChartsPod's strategies-and-backtests guide summary, as read on 17 October 2026. All numbers are illustrative and do not describe a real strategy's performance.

  1. TradingView Pine Script: Strategies — simulated fills and assumptions.
  2. ChartsPod documentation — guides for order flow, derivatives, alerts, backtests, journal and workspaces.

This article explains research tools and workflows. It is not financial advice, does not recommend buying or selling any asset and does not predict prices. Crypto derivatives carry a risk of rapid and total loss of margin.

CHARTSPOD EDITORIAL EDITION · RESEARCH AND EDUCATION ONLY · NOT FINANCIAL ADVICE.