Trading glossary
Profit Factor
Profit factor is the ratio of gross profits to gross losses across your closed trades, calculated by dividing the sum of all winning amounts by the sum of all losing amounts. A profit factor above 1.0 means the strategy is net profitable, and experienced traders usually target 1.5 or higher before they consider a system worth trading. The metric is sensitive to outliers, so it should be read together with expectancy and drawdown. A trading journal such as Traders Vault computes profit factor automatically and lets you break it down by strategy, pair or session to find which parts of your trading actually work.
What is Profit Factor in trading?
Profit factor is the ratio of gross profits to gross losses across your closed trades, calculated by dividing the sum of all winning amounts by the sum of all losing amounts. A profit factor above 1.0 means the strategy is net profitable, and experienced traders usually target 1.5 or higher before they consider a system worth trading. The metric is sensitive to outliers, so it should be read together with expectancy and drawdown. A trading journal such as Traders Vault computes profit factor automatically and lets you break it down by strategy, pair or session to find which parts of your trading actually work.