Glossary

Profit factor

Profit factor is gross profit divided by gross loss across a trader's closed trades.

In short

Profit factor measures how much a trader earns per unit lost: above 1.0 is net profitable, and the ratio's stability across periods matters more than its peak value. It is one input to the composite score used for basket weighting.

Why it is used alongside other measures

Profit factor is easy to inflate over short windows or with a handful of outsized wins, so it is read together with win-rate consistency, position discipline and account survivability.

A high profit factor from three trades is a small sample, not an edge. Sample size and stability are part of the assessment.

Questions

Frequently asked

What is a good profit factor?

Context-dependent. Stability across regimes is more informative than the absolute number.

Does it include funding and fees?

It is computed from realised trade outcomes; costs materially affect real results and are considered separately.

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