Profit factor is the total profit of the winning trades divided by the total loss of the losing trades, taken as a positive number. A profit factor of 1.5 means every $1 lost was matched by $1.50 won. Above 1 the trades made money overall, exactly 1 is break-even, and below 1 they lost.
What is the profit factor formula?
Profit factor = gross profit ÷ |gross loss|
Gross profit is the sum of every winning trade; gross loss is the sum of every losing trade. Both should be measured after swap and commission, otherwise the ratio flatters you. If there are no losing trades at all, the ratio cannot be calculated — it is undefined, not infinitely good.
Worked example
In a month, the winning trades add up to $3,000 and the losing trades to −$2,000. Profit factor = 3,000 ÷ 2,000 = 1.5, and the month's net result is +$1,000.
How does profit factor relate to win rate?
It combines how often you win with how big wins are compared with losses:
Profit factor = (win rate × average win) ÷ (loss rate × average loss)
So a 35% win rate with wins three times the size of losses gives 1.62, while a 65% win rate with wins half the size of losses gives only 0.93 — a losing record despite winning most of the time.
When does profit factor mislead?
- Small samples. Eight winners and one small loser can produce a profit factor of 10. It says nothing about the next fifty trades.
- One outlier. A single huge winner can carry a profit factor above 1 for months of otherwise losing trades. Check whether the result still holds with the biggest trade removed.
- Open losers. Profit factor only sees closed trades. Holding losing positions open keeps them out of the ratio until they are finally closed.
Profit factor in ApeX Journal
ApeX Journal calculates profit factor from each closed trade's net result, so swap and commission are included. When the range has no losing trade the tile stays empty rather than showing infinity, and its value is never coloured red, because a ratio cannot be negative — the change against the previous window shows the direction instead. In the Apex Score radar, a profit factor of 2.0 earns full marks on that axis.
Questions
What is a good profit factor?
Anything consistently above 1 after costs is profitable. Many traders treat 1.5 as solid and 2.0 as strong, which is also where the Apex Score in ApeX Journal gives full marks. A very high figure on a small number of trades is more likely luck than skill.
Why is my profit factor blank?
Because there were no losing trades in the selected range. Dividing by a gross loss of zero has no answer, so a journal should leave it empty rather than show a huge or infinite number.
Should I look at profit factor or expectancy?
Both. Profit factor tells you whether winnings outweigh losses; expectancy tells you how much each trade is worth on average. Two strategies with the same profit factor can have very different expectancy if one trades far more often or risks more per trade.