Profit Factor Calculator
Calculate your trading system profit factor from gross profit and gross loss totals.
Assess strategy quality and understand what a ratio above 1.5 means.
Profit Factor is one of the most important metrics for evaluating a trading strategy’s quality. It measures how much gross profit the system generates for every dollar lost — a single number that captures both win rate and average win/loss size together.
Profit Factor formula: Profit Factor = Gross Profit ÷ Gross Loss
Where:
- Gross Profit = sum of all winning trade profits (in dollars, not percentages)
- Gross Loss = sum of all losing trade losses (in dollars, absolute value)
Related formulas: Win Rate = Number of Winning Trades ÷ Total Trades Average Win = Gross Profit ÷ Number of Winning Trades Average Loss = Gross Loss ÷ Number of Losing Trades Expectancy = (Win Rate × Average Win) − (Loss Rate × Average Loss)
Profit Factor from win rate and reward-to-risk ratio: PF = (Win Rate × Avg Win) ÷ (Loss Rate × Avg Loss) PF = (Win Rate × R:R) ÷ (1 − Win Rate)
Where R:R = reward-to-risk ratio (Average Win ÷ Average Loss)
What each variable means:
- Profit Factor < 1.0: losing system; gross losses exceed gross profits
- Profit Factor = 1.0: break-even (before commissions); real-world = losing due to transaction costs
- Profit Factor 1.0–1.5: marginal; may be profitable but fragile; minor market regime change can destroy it
- Profit Factor 1.5–2.0: solid system; professional standard
- Profit Factor > 2.0: excellent; either high win rate, high R:R, or both
Reference: benchmark profit factors by strategy type:
- Trend following (low win rate, high R:R): 1.4–2.0 typical
- Mean reversion (high win rate, low R:R): 1.3–1.8 typical
- Scalping (very high win rate, small R:R): 1.2–1.6 typical
- Options selling strategies: 1.1–1.5 (premium collected regularly, rare large losses)
Worked example: Strategy backtested over 2 years, 200 trades:
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120 winners: average profit $245 each → Gross Profit = 120 × $245 = $29,400
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80 losers: average loss $180 each → Gross Loss = 80 × $180 = $14,400
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Profit Factor = $29,400 ÷ $14,400 = 2.04: excellent
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Win Rate = 120 ÷ 200 = 60%
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R:R = $245 ÷ $180 = 1.36:1
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Expectancy = (0.60 × $245) − (0.40 × $180) = $147 − $72 = $75 per trade expected profit
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Total profit over 200 trades: $29,400 − $14,400 = $15,000
How we build and check this calculator
This calculator runs entirely in your browser, so the numbers you enter stay on your device. The math behind it is written by hand and tested against worked examples and standard references before the page goes live.
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