Drawdown, Win Rate and Expectancy: Trading Performance Metrics
Drawdown is the fall in your account from a peak to the next low, measured in money and as a percentage of that peak. Win rate, expectancy and profit factor describe how often, how much and how efficiently trades pay, and read together, over enough trades, they describe a record far better than any one alone.
Module 15 · Lesson 2 of 4
What you'll learn
- What drawdown is, how to calculate it in money and as a percentage, and what maximum drawdown means.
- How to work out win rate, average win and loss, expectancy and profit factor from a record of trades.
- Why a loss of 20% needs a gain of 25% to recover, and why the gap widens as the loss grows.
- Why a small sample of trades says very little, whatever the numbers show.
This lesson is part of the Trading as a Business module.
What is drawdown in trading?
Drawdown is the fall in an account's value from a peak to the next low point, before a new peak is reached. It is usually stated twice: in money, such as $300, and as a percentage of the peak, such as 2.92%.
Drawdown answers a question that profit and loss does not: how far did the account fall along the way? MetaTrader 5 uses the same idea. Its tester documentation defines the maximal drawdown as the difference between the highest local value and the next lowest value, and the relative drawdown as that same gap as a percentage of the local high.
Definitions
- Maximum drawdown: the largest peak-to-trough fall in a record. It is one number for the whole period, and it can only stay the same or grow as more trades are added.
- Win rate: winning trades divided by all trades, as a percentage. It says how often you win, never how much.
- Average win and average loss: the total of the winning trades divided by their number, and the same for the losing trades.
- Payoff ratio: average win divided by average loss.
- Expectancy: the average result per trade, in money or in R. It is the same figure MetaTrader 5 calls Expected Payoff.
- Profit factor: gross profit divided by gross loss. At 1.00 they are equal.
- R: the money you risk on one trade, so a result of +2R is twice the amount risked. The trading journal lesson explains R.
How do you calculate drawdown?
To calculate drawdown, track the highest account value so far, subtract the current value from it, and divide by that peak for the percentage. The largest result over the whole record is the maximum drawdown. It needs only the account value after each closed trade, so a single spreadsheet column is enough.
- Write the account value after every closed trade, starting with the opening balance.
- Keep a running peak: the highest value reached so far.
- After each trade, drawdown in money = peak − current value.
- Drawdown in % = (peak − current value) ÷ peak × 100.
- The maximum drawdown is the biggest of those figures. Its start is a peak and its end is the low before a new peak.
Two points to note. First, the money and percentage maximums can occur at different times in a long record, because the same dollar loss is a larger percentage of a smaller account. Second, a record of closed trades hides the dips inside open trades. MetaTrader 5's Trading Report says its Max. Drawdown shows the balance or equity drawdown, whichever is worse, while the Strategy Tester report lists balance and equity versions separately.
How do you work out the metrics from a 20-trade record?
The metrics come from one record of trades, so the record below is built to let you work each one by hand. It uses a $10,000 demo-style account that risks a flat $100 (1% of the starting balance, 1R) on each trade.
| Trade | Result | R | Account value |
|---|---|---|---|
| 1 | +$150 | +1.5R | $10,150 |
| 2 | −$100 | −1R | $10,050 |
| 3 | −$100 | −1R | $9,950 |
| 4 | +$300 | +3R | $10,250 |
| 5 | −$100 | −1R | $10,150 |
| 6 | +$120 | +1.2R | $10,270 |
| 7 | −$100 | −1R | $10,170 |
| 8 | −$100 | −1R | $10,070 |
| 9 | −$100 | −1R | $9,970 |
| 10 | +$450 | +4.5R | $10,420 |
| 11 | −$100 | −1R | $10,320 |
| 12 | +$200 | +2R | $10,520 |
| 13 | −$100 | −1R | $10,420 |
| 14 | −$100 | −1R | $10,320 |
| 15 | +$180 | +1.8R | $10,500 |
| 16 | −$100 | −1R | $10,400 |
| 17 | +$260 | +2.6R | $10,660 |
| 18 | −$100 | −1R | $10,560 |
| 19 | −$100 | −1R | $10,460 |
| 20 | +$240 | +2.4R | $10,700 |
| Metric | Working | Result |
|---|---|---|
| Win rate | 8 wins ÷ 20 trades | 40% |
| Average win | $1,900 ÷ 8 | $237.50 (2.375R) |
| Average loss | $1,200 ÷ 12 | $100.00 (1R) |
| Expectancy | 0.40 × $237.50 − 0.60 × $100 | +$35.00 per trade (+0.35R) |
| Net result | $1,900 − $1,200 | +$700, which is 20 × $35 |
| Profit factor | $1,900 ÷ $1,200 | 1.58 |
| Maximum drawdown | Peak $10,270 after trade 6, low $9,970 after trade 9 | $300, or 2.92% of the peak |
| Longest losing run | Trades 7 to 9 | 3 trades |
Expectancy and the net result agree: $35 × 20 = $700. The same maximum drawdown is 3R. It was lived through for three trades before the account moved on.
Note that this record contains 12 losses out of 20. A method can lose more often than it wins and still show a positive result, when its wins are larger than its losses. It can also go the other way, as the next section shows.
What is win rate, and why is it not enough?
Win rate is the share of trades that closed in profit, and on its own it says little about whether a method makes money. It ignores the size of wins and losses: at a payoff ratio of 2.375, a method breaks even before costs at about 30% wins (1 ÷ 3.375 = 29.6%).
The risk reward ratio lesson shows the break-even win rate for each ratio. The comparison below uses two synthetic methods over 100 trades each.
| Method A | Method B | |
|---|---|---|
| Win rate | 70% | 40% |
| Average win | $50 | $300 |
| Average loss | $150 | $100 |
| Expectancy per trade | 0.70 × 50 − 0.30 × 150 = −$10 | 0.40 × 300 − 0.60 × 100 = +$60 |
| Result over 100 trades | −$1,000 | +$6,000 |
| Profit factor | 3,500 ÷ 4,500 = 0.78 | 12,000 ÷ 6,000 = 2.00 |
Method A wins seven trades in ten and still loses money, because its average loss is three times its average win. Method B loses more often than it wins and still shows a gain.
Work out the win rate you need
What is expectancy in trading?
Expectancy is the average amount one trade has made in a record, found by multiplying win rate by average win and subtracting loss rate times average loss. For the 20-trade record: 0.40 × $237.50 − 0.60 × $100 = $95 − $60 = $35. In R terms it is +0.35R per trade.
You can run the same sum on your own record with the trading expectancy calculator. MetaTrader 5 describes its Expected Payoff as a statistically calculated value showing the average return of one deal. Two points matter when you read it:
- It describes the past record. Each single trade still wins or loses in full; expectancy is the average across many.
- It is built from your own journal. If the journal skips trades, the figure is wrong. See the trading journal lesson.
What is profit factor?
Profit factor is gross profit divided by gross loss, so a value above 1.00 means the wins in the record outweighed the losses. MetaTrader 5 defines it as the ratio of gross profit to gross loss, with a value of one meaning they are equal. The 20-trade record gives $1,900 ÷ $1,200 = 1.58.
It ignores the order of trades, so it does not show drawdown. Two records can share a profit factor of 1.58 and have very different maximum drawdowns. MetaTrader 5's recovery factor, net profit divided by maximum drawdown, pairs the two: $700 ÷ $300 = 2.33 here.
How much do you need to recover from a drawdown?
A drawdown of a given percentage needs a larger percentage gain to recover, because the gain is measured on a smaller balance. The gain needed is drawdown ÷ (100% − drawdown). A 20% fall takes $10,000 to $8,000, and regaining $2,000 from $8,000 is a 25% gain.
| Drawdown | Account left (from $10,000) | Gain needed to recover |
|---|---|---|
| 5% | $9,500 | 5.3% |
| 10% | $9,000 | 11.1% |
| 20% | $8,000 | 25.0% |
| 30% | $7,000 | 42.9% |
| 50% | $5,000 | 100.0% |
The gap widens faster as the fall deepens, which is why the percentage maximum drawdown is read alongside the money figure. The 20-trade record's 2.92% drawdown needed only 3.0% ($300 ÷ $9,970) to be recovered. Risking less per trade makes the same losing run a shallower drawdown, which is why sizing matters; see the position sizing lesson and the pre-trade risk checklist.
Recovery is arithmetic, not a plan: the lever you control is how deep a drawdown gets, through risk per trade. How skilled traders handle a drawdown is covered in the surviving drawdowns lesson.
Why do small samples mislead?
Twenty trades are too few to know a method's true win rate or expectancy, because chance alone moves both a long way. Three quick tests on the same record show how fragile it is: the win rate could sit anywhere in a wide range, two trades decide the sign of expectancy, and streaks are normal.
- A wide range for win rate. A 95% Wilson interval for 8 wins in 20 trades runs from about 22% to 61%. The Wilson method is the one NIST's statistics handbook describes for proportions. It means chance alone could produce 8 wins in 20 trades from a method whose true rate is anywhere in that range.
- Two trades decide the sign. Remove the two biggest wins (+$450 and +$300) and the other 18 trades total −$50, an expectancy of −$2.78 per trade, instead of +$35.
- Streaks are normal. If each trade lost 60% of the time independently, a run of 5 or more losses at some point in 20 trades has a probability of about 48%. This record's longest run was 3, so it was kinder than a typical stretch.
Because the maximum drawdown can only grow as the record lengthens, the figure from a short record is a floor, not a ceiling. The honest reading is: these numbers describe 20 trades, not the method. The trade review cycle lesson covers how to review results on a schedule without over-reading short stretches.
How do you read performance metrics correctly?
Read performance metrics together, from a complete journal, net of costs and over as many trades as you have, because each one shows something the others hide. Win rate gives frequency, expectancy and profit factor give size, and maximum drawdown gives the path. A skilled trader checks all four before drawing a conclusion about a method.
- Include costs: spread, commission and swap belong in every result, or every figure is overstated.
- Record every trade: dropping unwanted trades removes the drawdowns you most need to see.
- Compare like with like: a record from a calm market and one from a volatile market measure different conditions, so label each period.
- Use all four numbers: win rate, expectancy, profit factor and drawdown each answer a different question.
Try it on demo
On a MetaTrader 5 demo account, take your last 20 journal entries, or use the table above. Write down the account value after each trade, then work out win rate, average win, average loss, expectancy, profit factor and maximum drawdown. Check you can reproduce +$35, 1.58 and $300 from the table first. Then compare your figures with the History tab's Report.
Quick check
- An account rises from $10,000 to $10,800, falls to $10,200, then reaches $11,000. The maximum drawdown in money is
- An account falls 20% from its peak. The gain needed just to get back to that peak is
- 12 wins averaging $80 and 8 losses averaging $150 over 20 trades. Expectancy per trade is
- A method wins 70% of its trades. It is
- Gross profit is $1,900 and gross loss is $1,200. The profit factor is
Frequently asked questions
What is a good drawdown percentage?
A good drawdown percentage is one that stays inside the limit your written plan sets, and shallower is easier to recover from. A 10% fall needs an 11.1% gain to recover, while a 50% fall needs 100%. Set the limit in advance and size each trade so a normal losing run stays well inside it.
What is the difference between drawdown and maximum drawdown?
Drawdown is any fall from a peak to a later low, while maximum drawdown is the largest such fall in a whole record. In the 20-trade example, the account fell $300 from $10,270 to $9,970, and no other fall was as large. Current drawdown is simply how far the account is below its latest peak today.
How do you calculate expectancy in trading?
Expectancy equals win rate times average win, minus loss rate times average loss. With a 40% win rate, a $237.50 average win and a $100 average loss, it is 0.40 × 237.50 − 0.60 × 100 = +$35 per trade. It describes the past record, and it becomes more reliable as the number of trades grows.
Does a high win rate mean a strategy is profitable?
No. A high win rate only means winning trades are frequent. If the average loss is larger than the average win, a 70% win rate can still lose money, as Method A shows: 0.70 × $50 − 0.30 × $150 = −$10 per trade.
How many trades do you need to judge a win rate?
Use as many trades as you can, and treat 20 as a starting point rather than a verdict. A 40% win rate from 20 trades is consistent with true rates from about 22% to 61%, and each extra trade narrows that range.
Sources
- MetaQuotes, MetaTrader 5 Help: Testing Report, accessed 19 October 2026: maximal balance and equity drawdown are the difference between the highest local value and the next lowest value, relative drawdown is the same gap as a percentage of the local high, profit factor is the ratio of gross profit to gross loss, recovery factor is gained profit divided by maximum drawdown, and Expected Payoff is the average return of one deal. https://www.metatrader5.com/en/terminal/help/algotrading/testing_report
- MetaQuotes, MetaTrader 5 Help: Trading Report, accessed 19 October 2026: the Trading Report shows win trades as a percentage of all trades, profit factor as total profit to total loss, and a Max. Drawdown that shows the balance or equity drawdown, whichever is worse. https://www.metatrader5.com/en/terminal/help/trading/report
- NIST/SEMATECH, e-Handbook of Statistical Methods, 7.2.4.1 Confidence intervals, accessed 19 October 2026: the Wilson method gives confidence intervals for a proportion. https://www.itl.nist.gov/div898/handbook/prc/section2/prc241.htm
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