Your plan 2 / 5
Your plan · Level 5Lesson 2 of 4

A trading plan and expectancy: what a trade is worth

A plan turns "I think it will go up" into rules you can check: when you enter, where you are wrong, how much you risk, and when you take profit. Then arithmetic says whether the rules can pay.

You will learn
  • The parts of a trading plan
  • How to measure results in R and calculate expectancy
  • Why fees matter far more with tight stops

Before you start: The lesson on risk per trade and position size.

The parts of a plan

A trading plan answers the same questions before every trade:

  • Market and timeframe — what you trade, and on which charts.
  • Setup — the conditions that must be on the chart before you consider a trade.
  • Entry — exactly when you get in: a close above a level, a limit at a zone.
  • Invalidation — where the idea is wrong: the stop.
  • Size — from the risk per trade and the stop distance (the Foundations lesson on risk).
  • Exit — where you take profit, or how you trail the stop.
  • When not to trade — news, a losing streak, a market you do not understand.

Measuring in R

R is the amount risked on a trade. A trade that hits its stop loses 1R; one that makes three times the risk makes 3R. Measured in R, trades with different sizes and stops become comparable.

Two numbers describe a plan: how often it wins, and how big the wins are against the losses (reward to risk). Together they give the expectancy — what one trade is worth on average:

expectancy = win rate × average win − loss rate × average loss (in R)

A plan that wins 40% of the time with wins of 2R: 0.4 × 2 − 0.6 × 1 = +0.2R a trade. It breaks even at a win rate of 1 ÷ (reward : risk + 1) — 33% for 2 : 1.

Expectancy — with a 40% win rate and wins of 2R, a trade is worth +0.20R before fees. With Binance's regular spot fee of 0.1% on entry and on exit, a stop 1% away costs 0.20R a trade in fees and leaves nothing; a stop 0.5% away costs 0.40R and turns the plan into −0.20R a trade. A 50% win rate at 1 : 1 is worth 0 before fees and −0.20R after them with a 1% stop.

Fees scale with your stop

Fees are paid on the size of the position, and a closer stop means a bigger position for the same risk. So the same 0.2% round trip costs 0.2R with a 1% stop, 0.4R with a 0.5% stop, and only 0.04R with a 5% stop. Plans with very tight stops need a much higher win rate just to pay the exchange.

Check yourself · 1 of 3A plan wins 50% of its trades; wins are 1.5R, losses 1R. What is its expectancy before fees?
Show the answer

0.5 × 1.5 − 0.5 × 1 = +0.25R a trade.

Check yourself · 2 of 3At 2 : 1 reward to risk, what win rate breaks even before fees?
Show the answer

1 ÷ (2 + 1) = 33.3%.

Check yourself · 3 of 3With a 0.1% fee per side, what do fees cost per trade with a stop 0.5% away?
Show the answer

A round trip costs 0.2% of the position; with a 0.5% stop that is 0.2 ÷ 0.5 = 0.4 of the risk.

Takeaways
  1. A plan fixes setup, entry, stop, size, exit — and when not to trade — before the trade.
  2. R is the amount risked; measure every result in R.
  3. Expectancy = win rate × average win − loss rate × average loss.
  4. Fees grow as the stop tightens: 0.2% ÷ stop distance, in R.

Open BTC in the terminal and write your plan for the chart in front of you

Further reading

Education only, not financial advice · Updated 28 Oct 2026 · Data: Binance · Report a mistake