What Is Profit Factor?

Profit factor is a strategy's gross profit divided by its gross loss. Above 1.0, the strategy made money over the sample; below 1.0, it lost money.

Formula

Profit factor = Gross profit ÷ Gross loss

Example

If your winning trades total $3,600 and your losing trades total $2,400, profit factor is 1.5: you made $1.50 for every dollar lost.

What is a good profit factor?

As a rough guide, 1.2 to 1.5 is a workable edge and 1.5 to 2.0 is strong. Very high numbers over small samples are often luck or an overfitted backtest. Always include commissions and spreads.

Read the full guide: profit factor explained, or use the profit factor calculator. Related: expectancy, win rate. See the trading glossary.