Profit factor compresses a trading record into one ratio: the money your winners made divided by the money your losers cost. Above 1 you are making money, below 1 you are losing it, and the distance from 1 tells you how much room there is for a bad month.

Formula

profit factor = gross profit / gross loss

Gross profit is the sum of all winning trades. Gross loss is the sum of all losing trades, written as a positive number. Both are net of commissions and fees, so the ratio reflects money you actually kept.

Example

Twenty trades: 11 winners averaging $180 and 9 losers averaging $150.

Step Calculation Result
Gross profit 11 × $180 $1,980
Gross loss 9 × $150 $1,350
Profit factor 1,980 / 1,350 1.47

For every dollar lost, the record made $1.47 back.

How to read it

Profit factor Usually means
below 1.0 losing money
1.0 to 1.3 roughly breakeven after a bad week
1.3 to 2.0 a working discretionary system
2.0 to 3.0 strong; check the sample size
above 3.0 almost always too few trades

One big winner in a small sample can push profit factor to 4 or 5 on its own. Below 30 trades, treat it as a rumour, not a statistic.

When there are no losses

With no losing trades the gross loss is zero and the ratio is undefined. A journal should show nothing rather than "infinity" or a made-up 99. SetupBook writes "no losing trades yet" under an empty value.

In SetupBook

Profit factor is a dashboard card and one of the six components of the trader score in Analytics, where a profit factor of 1 scores nothing and 2.5 or more scores in full. Breakeven trades are left out of both sides.

Profit factor and expectancy

Profit factor tells you the ratio; expectancy tells you the size per trade. A profit factor of 1.47 over twenty trades is $31.50 per trade in the example above. Read both.