Glossary

Profit factor

Gross profit divided by gross loss; above 1 means the account made more than it lost.

Profit factor is one of the oldest strategy summaries: add up every winning trade, add up every losing trade, and divide. A profit factor of 1.5 means the account made 1.5 units for every unit it lost.

It says nothing about how the wins and losses were sized or sequenced, so a healthy profit factor can still sit on top of a martingale sequence or a single lucky trade. Read it alongside expectancy and the drawdown, not on its own.