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Glossary
Profit factor
Profit factor is gross profit divided by gross loss over a set of trades. A profit factor of 1.5 means you made $1.50 for every $1 you lost; below 1.0 means the strategy lost money overall. It is one of the cleanest single measures of whether winning trades are actually paying for the losing ones.
Because it uses gross totals rather than averages, profit factor naturally accounts for both frequency and size of wins and losses. That makes it harder to flatter than win rate.
Sustained profit factors well above 2 on large samples are uncommon; a stable figure above roughly 1.3–1.5 across many trades and varied conditions is a more realistic sign of a durable edge than a spectacular number from a small sample.
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