Learn how to use "Profit Factor"

Written by John
Updated 11 months ago

What is "Profit Factor"?

It is used to determine whether you have good risk management. Traders who have a high profit factor tend to do better than traders who have a low one.

Example  A profit factor of 1 means you are breaking even. A profit factor of 2 means for $1 that you risk, you make $2. If you lose all your trades for the day or have no losses, your profit factor will be 0.

How is it calculated?

(Sum of your net winning trades) / (Sum of your net losing trades)

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