Glossary / Performance metrics
Profit factor
Definition
Gross profit divided by gross loss.
Why it matters
Anything above 1.0 is profitable before costs. Most durable discretionary strategies land between 1.2 and 2.0; much higher usually means a small sample or an unrealized loser being carried.
Formula
Profit factor = Gross profit / Gross loss
Example
$12,000 of wins against $8,000 of losses is a profit factor of 1.5.
How to track it in a journal
TradeStack calculates the core performance numbers — win rate, average win and loss, profit factor, expectancy, drawdown and consistency — automatically from imported trades, so profit factor stops being something you estimate and becomes something you read.
Related terms
Expectancy
The average profit or loss you can expect from each trade over a large sample.
Win rate
The share of your trades that close in profit.
Average win
Total profit from winning trades divided by the number of winning trades.
Average loss
Total loss from losing trades divided by the number of losing trades.
Questions that use this term
Keep reading
Trading journal guides
Expectancy, profit factor, drawdown, backtesting and the PDT rule.
Free trading calculators
Position size, risk-reward, expectancy and options profit.
Expectancy calculator
Expected profit per trade from your own numbers.
Broker CSV export guides
Step-by-step exports for Tradovate, NinjaTrader, IBKR and more.
Stop estimating your numbers
TradeStack is a free trading journal that calculates them from your own trades.
Start free