What is profit factor in trading?
In one line: Profit factor is the total of all winning trades divided by the total of all losing trades. Above 1 means the wins added up to more than the losses.
The formula
Profit factor = total of all wins ÷ total of all losses (losses counted as a positive number)
It's a one-number summary of a batch of trades, often shown in backtest reports, including TradingView's Strategy Tester.
A simple example
You log 40 practice trades, in units of risk (R).
- The 16 winners add up to +30R.
- The 24 losers add up to −20R.
Profit factor = 30 ÷ 20 = 1.5.
For every 1R lost across those trades, 1.5R was won. A math example, not a promise.
What the numbers mean
| Profit factor | Meaning |
|---|---|
| Below 1 | Losses added up to more than wins |
| Exactly 1 | Break-even, before costs |
| Above 1 | Wins added up to more than losses |
Why it matters
It's a quick health check. Two traders with the same Win rate can have very different profit factors, because their wins and losses are different sizes.
It pairs well with Expectancy. Expectancy tells you the average per trade. Profit factor tells you the ratio of the two piles. The free expectancy calculator helps with the first.
A common mistake
Trusting a huge number from a tiny sample. A profit factor of 5 from 12 trades often means one or two big wins did all the work. Remove them and the picture may change completely.
Also watch out for tweaking settings until a backtest looks perfect. A strategy fitted that tightly to the past often behaves differently on new charts. More in how to backtest a trading strategy.
Include spreads, commissions and slippage before working out profit factor. Costs can turn 1.1 into 0.9.
Questions
What is a good profit factor?
Above 1 means wins outweighed losses in that sample. Many traders look for a margin above 1 after costs, over 100+ trades. Past results don't guarantee future ones.
Can profit factor be infinite?
If there are no losing trades, the math divides by zero. That usually means the sample is too small to judge.
Is profit factor better than win rate?
It tells you more, because it includes the size of wins and losses. Look at both, plus the number of trades.
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