Exploring Expected Value: The Psychology and Math of Big Wins vs. Frequent Wins

Last time, we talked about expectancy. We defined the formula and how to calculate it. If you haven’t read that issue yet, I encourage you to check it out first issue on that - Expected Value in Trading: Measuring Your Strategy’s Real Potential 

I also suggested playing around with the ClockTrades Expectancy Calculator to observe how expectancy behaves. In my opinion, it’s one of the most valuable lessons a trader can explore. So what can the serious student actually learn from it?

Let’s dig in.

Our starting point is the classic mantra: a 2R reward with a 40% win rate which provides an expectancy of 0.2.

We learned that an expectancy of 0.2 means that, over the long run, for every dollar risked, you can expect to make an additional 20 cents.

Last time, we assumed 10 trade opportunities per month. Four of them would win 2 times the risk, and six would lose 1 time the risk. The result? The trader earns:

(4 × 2R) – (6 × 1R) = 8R – 6R = 2R

So if the trader risks $100 per trade (R = $100), they would earn $200 in that month.

Is that good? Bad? Enough? We’ll explore that in the next issues. For now, let’s focus on the relationship between win rate, R-multiple, and expectancy.

🏃‍♂️ Chasing Wins, Avoiding Losses

It’s intuitive to think that if we aim for a smaller R (reward), we should be able to win more often. And when win rate increases, drawdowns shrink. That’s a big goal for most beginner traders—not to win, but to avoid losing.

That’s the mindset early in the journey: "If I could just stop losing..."

So when a trader finds it difficult to maintain a 40% win rate for 2R trades, they often start cutting their reward target to win more frequently—because winning feels better.

They might reduce the target to 1R. But to maintain just a 0.2 expectancy, now their win rate needs to jump to 60%.

Let’s think about how it feels:

- With a 40% win rate, six out of ten trades lose 1R.

- Losing one trade? That’s fine.

- Losing a second? Anxiety kicks in—*“Now I need a win just to break even.”*

- Losing a third? “Even if I win now, I’m still down.”

This can trigger the urge to "get it all back"—leading to overtrading, burnout, and possibly blowing the account.

Even though three losses in a row are normal and expected in the strategy, the emotional cost becomes too high. Expectations, ego, and stress take over.

So traders drop their reward target to raise win rate. It's a kind of “healing.” But is it really?

🛤️ Two Paths in Expected Value: More Wins or Bigger Wins?

Some traders go in the other direction. They lower their reward target and their win rate in exchange for more opportunities.

They take more trades—maybe just capturing a few ticks at a time.

What’s the result? More trades, lower expectancy per trade, but higher turnover.

Who’s happiest? Brokers—collecting bigger fees.

Why do traders chase more opportunities?

- Staring at charts without acting feels dull

- They want to replace a daily “paycheck” with trading

- Their profit expectations are high

- They believe the more they trade, the better they’ll get

What I suggest is this: go back to the ClockTrades Expectancy Calculator.

🧪 Try This: Test Your Trading Strategy’s Expected Value

Start by decreasing your R reward and increasing your win rate. See what happens to expectancy. If expectancy drops, try raising the number of trades per period.

How does it feel?

- Does hitting a 70–80% win rate feel natural? Effortless? “Click click, done”?

- Or does it feel like grinding work?

- Could it be done by a robot? Probably.

Now flip it.

Reduce the number of trades. Drop your win rate. Increase your R reward.

If you start seeing the math come alive—where fewer trades and lower win rate still produce great returns—you’re on the right track.

🧠 The Mind Game Behind Expected Value in Trading

Exactly. Because most of this industry wants to keep you stuck at breakeven.

Chasing big winners isn’t easier—it just shifts the pain.

Now, the pain is in the waiting. Waiting for the setup. Waiting for the trade to play out. And most of all, not interfering with a good trade while it’s still open.

📚 Homework

If you haven’t already, go to the ClockTrades Expectancy Calculator and answer this:

Am I saying 6R is the ideal setup?

No.

So what is?

We’ll learn how to find it!

Put your homework answer in the comments—and let me know how it feels. Was it surprising? Encouraging? Frustrating?

I'd love to hear your thoughts.

After exploration of the expected value it now time to learn:

• Next read: How Much to Risk Per Trade: Position Sizing, Expectancy & the Kelly Criterion 

If you’re just beginning this journey with us and enjoyed this issue, you might want to start with the Why I Write This (and for Whom) — or jump straight into the Expected Value in Trading: Measuring Your Strategy’s Real Potential where we break down the key concepts behind the tools we explore here.

— Kamil - Markets&Manners