Profit Factor Calculator
Profit factor is gross profit divided by gross loss: how many units you win for each unit you lose. Enter the two totals or paste a list of trade results to get the profit factor, and see where it sits against the ranges systematic traders commonly use.
Profit factor
1.36
16,200.00 / 11,880.00
Net profit
+4,320.00
Gross profit − gross loss
Range: 1.2 to 1.5
Workable for many systematic strategies, especially with a large sample.
| Below 1.0 | Losing strategy |
|---|---|
| 1.0 to 1.2 | Thin edge. A small rise in costs or slippage can erase it |
| 1.2 to 1.5 | Workable for many systematic strategies, especially with a large sample |
| 1.5 to 2.0 | Strong, if the sample and costs are realistic |
| 2.0 to 3.0 | Exceptional. Check the code and the sample carefully |
| Above 3.0 | Usually a red flag on a backtest with a decent sample |
The profit factor formula
Profit factor = Gross profit / Gross loss
= (Win rate × Average win) / (Loss rate × Average loss)Gross profit is the sum of all winning trades; gross loss is the sum of all losing trades, taken as a positive number. Use closed trades only, after commission and slippage. If there are no losing trades the profit factor is undefined.
Worked example
120 trades: 54 winners averaging $300 and 66 losers averaging $180. Gross profit is 54 × $300 = $16,200, gross loss is 66 × $180 = $11,880, so the profit factor is $16,200 / $11,880 = 1.36. Add $10 per trade in costs and the winners shrink to $290 and the losers grow to $190: $15,660 / $12,540 = 1.25.
Profit factor ranges
These are rules of thumb, not research findings, and they assume results after costs on a reasonable sample. They come from our guide to what counts as a good profit factor.
| Profit factor | What it usually means |
|---|---|
| Below 1.0 | Losing strategy |
| 1.0 to 1.2 | Thin edge. A small rise in costs or slippage can erase it |
| 1.2 to 1.5 | Workable for many systematic strategies, especially with a large sample |
| 1.5 to 2.0 | Strong, if the sample and costs are realistic |
| 2.0 to 3.0 | Exceptional. Check the code and the sample carefully |
| Above 3.0 | Usually a red flag on a backtest with a decent sample |
Strategy style moves these ranges: a trend-following system with a low win rate can have a modest profit factor and still be worth trading, while a high-frequency strategy needs more headroom for costs. Profit factor also says nothing about size, so read it alongside expectancy.
FAQs
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