What is Profit factor?
In short
Gross profit divided by gross loss. Above 1 means the system is net profitable.
Learn more →Profit factor is the sum of all winning trades divided by the sum of all losing trades:
- Profit factor = Gross profit ÷ Gross loss
Gross loss is taken as a positive number. PF = 1 means break-even, above 1 means net profitable, below 1 means net losing. For example, a PF of 1.5 means $1.50 of profit for every $1 of loss.
What it shows
Profit factor combines win rate and the size of average wins and losses into one number, which makes it handy for comparing strategies or signal histories. limitup's track record page publishes signal results with metrics like this.
How to read it
After commissions and slippage, a PF around 1.0–1.2 is fragile: a small change pushes it below 1. 1.5–2 is a sturdier result. A very high PF (say 4–5) is often a sign of too few trades or a backtest fitted to the past.
Limitations
PF says nothing about the number of trades, time or drawdown. A PF of 3 over 10 trades can be luck. If there are no losses at all, the formula is meaningless (infinite). Judge it together with expectancy and maximum drawdown.
Profit factor = gross wins ÷ gross losses. Below 1 the setup loses money. Behind the overall 1.07 hide one strong setup and two losing ones.
Example
An illustrative journal of 30 trades:
- 12 winning trades, total +$3,600 (average $300).
- 18 losing trades, total −$2,400 (average about $133).
- Profit factor = $3,600 ÷ $2,400 = 1.5.
- Net result: $3,600 − $2,400 = +$1,200.
- Yet the win rate is only 12 ÷ 30 = 40%.
If we add $10 commission per trade ($300 in total), gross profit becomes $3,480, gross loss $2,580, and PF drops to about 1.35.
Mistakes and tips
Calculate PF after commissions and slippage — the "clean" number overstates real results.
Don't put much faith in a PF based on fewer than 30–50 trades: one big winner can swing it sharply.
When comparing two strategies, look at maximum drawdown alongside PF.
Calculate it
Frequently asked questions
- What is a good profit factor?
- Anything above 1 is profitable, but after costs 1.5 or higher is usually considered robust. The number should be based on a meaningful number of trades.
- What is the difference between profit factor and win rate?
- Win rate only counts how many trades won; profit factor compares how much money was made versus lost. You can have a high PF with a low win rate.
Learn it in the Academy
This term is covered with hands-on examples and a quiz in these lessons of the interactive course.
- R:R — risk/reward ratioR units, the win rate you need, expectancy and profit factor with numbers; how partial exits change R and how to set realistic targets.Open lesson · 11 min
- Demo trading: practice without money, but seriouslyMaking demo realistic, a 30-day plan, which numbers to track and when to move to real money.Open lesson · 11 min
- Trading journal: learning from your own statisticsWhat to record, tagging setups, computing win rate, expectancy and profit factor, and finding where the money leaks out.Open lesson · 12 min
Try the theory without risk
Open a free account: demo trading with a $10,000 virtual balance, a trading journal, calculators and a step-by-step course.
Related terms
Read more on this
- Trading journal: what to record and how to analyse the resultsA journal isn't a notebook — it shows which of your decisions make money and which lose it. What to record, which numbers to watch, and CSV import.
- Our signal results: open report for Q3 2026146 signals, 139 closed, 61% win rate, +1.3% average. Alongside the good numbers — the bad ones too: losses, weak weeks and the limits of the calculation.
- What a signal is and isn't: TP/SL, probability and track recordA signal is not a guarantee — it's a notice that a rule was met. How to read one, what TP/SL mean and which numbers to judge results by.