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Profit factor

How many dollars the winners made for every dollar the losers cost. Below 1.0 the strategy loses money regardless of how often it is right.

Updated 2026-09-03

How it is calculated

Profit factor = gross profit ÷ gross loss

Profit factor is total money made by winning trades divided by total money lost by losing ones. Above 1.0 the strategy made money; below 1.0 it did not.

profit factor = gross profit ÷ gross loss

It is the natural companion to win rate, because it captures the sizes the win rate ignores.

Around 1.5 is respectable for a real strategy. Above 2 is excellent and worth being sceptical about. Well above 3 on any meaningful number of trades usually means a bug, an unrealistic fill assumption, or a backtest that has quietly used information from the future.

Check how much of the gross profit came from the single best trade. A profit factor of 2.0 where one trade supplies most of the numerator is not a profit factor of 2.0 in any useful sense. It is one lucky trade with a strategy attached.

See also

  • Win rate — The share of trades that made money. High on its own means little, since many small wins and one catastrophic loss still lose.
  • Total return — What the account gained or lost across the whole test, start to finish.

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Educational content, not investment advice. Angie explains how a valuation is built so you can judge it yourself. What you do with that is your call.

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