Profit Factor Calculator — Trading Strategy Evaluation

Profit factor = Gross Profit ÷ Gross Loss. It measures how much you earn for every dollar you lose. A profit factor of 2.0 means you make $2 for every $1 lost. It is one of the most important metrics for evaluating a trading strategy because it combines win rate and average win/loss into a single number.

Below 1.0 = losing strategy. 1.0–1.5 = marginal (may not survive real costs like spread and slippage). 1.5–2.0 = acceptable for live trading. 2.0–3.0 = good. Above 3.0 = excellent (but verify with enough trades — small sample sizes can produce misleadingly high profit factors).

Most professional traders require at least 100 trades before trusting a profit factor reading. With fewer trades, a few lucky wins can inflate the number. With 30 trades or fewer, profit factor is mostly noise. The more trades in your sample, the more statistically meaningful the result.

Yes — and this is common in trend-following strategies. A system with a 35% win rate but an average win of $500 and average loss of $100 has a profit factor of (0.35 × 500) ÷ (0.65 × 100) = 175 ÷ 65 = 2.69. High profit factors are achievable with low win rates when the reward-to-risk ratio is high.

Below 1.0: unprofitable. 1.0–1.25: marginally profitable, not worth trading live. 1.25–1.5: acceptable, worth continuing to develop. 1.5–2.0: good — most professional strategies fall here. 2.0–3.0: excellent. Above 3.0: outstanding or possibly curve-fitted (verify with out-of-sample data). A strategy with profit factor 1.8 or higher and 200+ trades in the sample is generally considered robust enough to trade real money.