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Average Trade Profit (often referred to as Trade Expectancy) tells you exactly how much money your strategy makes, on average, every single time it executes a trade. This metric blends both your winning trades and your losing trades into a single, highly actionable number. If your Average Trade Profit is positive, your system has a mathematical edge. If it is negative, your system is mathematically guaranteed to lose money over time.

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The Formula

The calculation is straightforward. It takes your absolute bottom line and divides it by the total number of executions: Average Trade Profit=Net ProfitTotal Trades\text{Average Trade Profit} = \frac{\text{Net Profit}}{\text{Total Trades}}

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Why This Metric is Critical

Average Trade Profit is your ultimate defense against transaction costs (slippage, taxes, and broker fees). If a backtest reveals an Average Trade Profit of ₹15.00 per trade, but your broker charges ₹20.00 per execution, your backtest might look profitable on paper, but it will rapidly drain your capital in live markets. Institutions look for strategies with an Average Trade Profit that is significantly higher than their estimated transaction friction, ensuring a massive “margin of safety” for real-world execution.