← Glossary

Profit factor

A profit factor above 1 means gross profits exceeded gross losses over the sample; below 1 means the reverse. It's a different lens than expectancy — expectancy is per-trade in R terms, profit factor is a ratio of dollar totals — and the two can disagree on a lopsided sample, such as a few very large wins covering many small losses.

ProfitFactor = Σ GrossProfit / Σ GrossLoss

This explains what profit factor measures. It isn't investment advice — see the disclaimer.