Quick Answer
Profit factor is gross profit divided by gross loss over a set of trades. A profit factor above 1 means total winning trades outweighed total losing trades in dollar terms; a profit factor below 1 means the opposite, regardless of how many individual trades won or lost.
- Profit Factor
- Profit Factor = Gross Profit ÷ Gross Loss, where gross profit is the sum of all winning trades and gross loss is the sum of all losing trades (as a positive number). It measures overall profitability relative to overall losses, independent of win rate.
- See what counts as a good profit factor →
Worked Example
Hypothetical example — not actual performance data
The numbers below are illustrative only. They are not Wrytics user data and don't represent typical or guaranteed results.
Suppose over 50 trades, the winning trades add up to $4,000 in gross profit and the losing trades add up to $2,500 in gross loss. Profit Factor = $4,000 ÷ $2,500 = 1.6. That means for every $1 lost across all losing trades, $1.60 was gained across all winning trades.
Profit Factor vs. Win Rate
Profit factor and win rate answer different questions. A trader can win only 30% of trades and still have a strong profit factor if the winning trades are much larger on average than the losing ones. Conversely, a trader can win 70% of trades and have a weak or even negative profit factor if the occasional loss is large enough to outweigh many small wins. Looking at profit factor alongside win rate gives a more complete picture than either alone.
Limitations of Profit Factor
- It's a ratio of totals, not an average — a single very large winning trade can produce a strong profit factor that doesn't reflect typical performance.
- It doesn't account for how the wins and losses were distributed over time, or how large a drawdown was experienced along the way.
- Like other performance metrics, it's most meaningful over a large enough sample of trades — a few trades can produce an extreme or misleading ratio.
- It's a backward-looking measure and doesn't guarantee the same ratio will hold in future trades.
Key Takeaways
- Profit Factor = Gross Profit ÷ Gross Loss.
- A profit factor above 1 means total wins outweighed total losses in dollar terms.
- It's independent of win rate — a low win rate can still produce a strong profit factor, and vice versa.
- It's most reliable over a large sample of trades and doesn't guarantee future results.
How Wrytics Can Help
Wrytics calculates profit factor automatically from your logged or MT5-synced trades, alongside win rate, expectancy, and other performance analytics, so you can see it update as new trades close.