Definition
Compare the profits you keep with the losses you take.
Formula. Sum of positive net trade P&L ÷ absolute sum of negative net trade P&L. No losses with positive profits produces ∞; no closed trades, or only breakeven trades, is unavailable.
Worked example
| Trades | Gross profit | Gross loss | Profit factor |
|---|---|---|---|
| 6 wins at $100, 4 losses at $200 | $600 | $800 | 0.75 — losing |
| 6 wins at $100, 4 losses at $100 | $600 | $400 | 1.50 |
| 40 wins at $50, 60 losses at $25 | $2,000 | $1,500 | 1.33 at a 40% win rate |
| 12 wins, 0 losses | $1,200 | $0 | ∞ — not comparable |
How it goes wrong
- Reading it without the trade count
- Profit factor over 14 trades is noise. The same value over 400 trades is a finding. Orderblock shows the count beside every grouped result for this reason.
- Treating the no-loss case as a big number
- With profits and no losses the ratio is infinite, not “very high”. Orderblock reports it as ∞ rather than a large finite number that would sort and average incorrectly.
- Comparing gross and net figures
- A profit factor computed before commissions is not comparable with one computed after. Orderblock uses net P&L, including costs where the source provides them.
- Averaging it across groups
- The profit factor of a whole account is not the average of its strategies’ profit factors. Recompute from the underlying sums.
Questions
What is a good profit factor?
Above 1.0 means gross profits exceeded gross losses over that sample. Many profitable discretionary traders sit between 1.2 and 1.6 net of costs over large samples. Values above 2 over small samples usually reflect variance or a survivorship-filtered period rather than a durable edge.
Profit factor or expectancy?
Expectancy tells you the average money outcome per trade, which is what compounds. Profit factor tells you the ratio between the two sides, which is what survives a change in position size. Read both; they fail in different directions.