How to calculate profit factor, what values are good for day traders and swing traders, its limitations, and how to use it alongside other metrics.
Profit factor is one of the simplest and most useful performance metrics. It answers one question: for every dollar you lost, how many did you make?
Profit factor = Gross profit ÷ Gross loss
Example: your winning trades made $18,000 in total and your losing trades lost $12,000. Profit factor = 18,000 ÷ 12,000 = 1.5.
Use net figures after commissions and fees. Fees can turn a profit factor of 1.1 into 0.95.
There is no universal answer, but rough guides used by many traders, after costs:
| Profit factor | Typical reading |
|---|---|
| Below 1.0 | Losing strategy |
| 1.0 to 1.2 | Marginal; fragile to costs and changing conditions |
| 1.2 to 1.5 | Solid for active trading |
| 1.5 to 2.0 | Strong |
| Above 2.0 | Excellent, or a small sample; check carefully |
Very high profit factors over a small number of trades usually come down to a few big winners. Check whether the result holds without your best two or three trades.
That is why profit factor works best next to expectancy, drawdown and the number of trades.
Profit factor is shown on the dashboard and statistics pages, and you can see it for any filtered group of trades, such as one setup or one month. Metric history shows how it has changed over time.
How the Sharpe ratio measures risk-adjusted returns, how to calculate it from daily trading returns, what values are typical, and its limitations for active traders.
How the Sortino ratio differs from the Sharpe ratio, how to calculate downside deviation, and when the Sortino ratio gives a fairer picture of a trading strategy.
How to calculate your average win and average loss, why their ratio matters as much as your win rate, and how to improve it.
