Profit factor: what it is and what value you need
The month closed green, win rate is 65% — the system seems to work. Yet a quarter later the account is right where it started. The answer is usually a number few traders track: profit factor. Here is what it shows, which values are normal and how to raise it without changing your strategy.
What profit factor is
Profit factor (PF) is the ratio of all money made to all money lost over the same period.
If in a month the winning trades brought 2,160 USDT and the losing ones took 1,540 USDT, PF = 2,160 ÷ 1,540 = 1.40. For every dollar lost, the system returned a dollar forty.
Important: both sums are counted after fees and funding. If fees are not deducted, PF almost always looks better than it really is — especially for traders who enter and exit often.
How to read the value
| Profit factor | What it means |
|---|---|
| below 1.0 | The system loses money. It doesn't matter how many trades are green. |
| 1.0 – 1.5 | On the edge. Formally there is a profit, but the margin is thin: slippage, higher fees or a couple of bad weeks will wipe it out. |
| 1.5 – 2.5 | A working system with a safety margin. |
| above 3 | Either a very strong approach or too few trades. Check the sample before celebrating. |
The boundaries are rough: they are reference points traders rely on, not a law. For scalping with hundreds of trades a PF of 1.3 can be an excellent result; for swing trading with a dozen trades a month it is weak.
A PF below 1 means the system loses money, no matter how many trades are green.
Why win rate doesn't replace profit factor
Win rate is the share of winning trades. It says nothing about how much a winning trade brings and how much a losing one takes. Two systems as an example:
- System A: win rate 70%, average win 50, average loss 150. Over 10 trades: 7 × 50 − 3 × 150 = −100. PF = 350 ÷ 450 = 0.78.
- System B: win rate 40%, average win 150, average loss 60. Over 10 trades: 4 × 150 − 6 × 60 = +240. PF = 600 ÷ 360 = 1.67.
The system with the high win rate loses money, the one with the “bad” win rate makes it. A high win rate often means the opposite of good trading: profits are taken early while losses are held in hope of a reversal.
What matters is not the share of wins but how much each win and each loss is worth.
Expectancy — the other half of the picture
PF shows the ratio, expectancy shows how much one trade brings on average:
System B from the example has an expectancy of +24 per trade (more in the article on expectancy). This is the number that gets multiplied by your trades per month and turns into a result. If expectancy is smaller than your average fee per trade, the system works for the exchange.
How many trades you need before trusting the number
On 10 trades, one big win flips PF from 0.8 to 2.0. A stable picture needs at least 30–50 closed trades taken on the same entry logic. Before that, PF is a reason to look closer, not a conclusion.
And calculate PF separately per setup and per source: an overall PF of 1.3 can be made of one setup with PF 2.1 and another with PF 0.7. Switch off the second and the result improves without changing anything in the first.
Under 30–50 trades, PF is a reason to look closer, not a conclusion.
Three ways to raise profit factor without changing the strategy
- Don't let a loss grow beyond the plan. Trades closed worse than your own stop are the most common source of a sagging PF. Count how much you lost beyond the planned risk: that is a pure leak.
- Cut trades outside the plan. Emotional entries, entries after a losing streak, in the hours when you usually lose, almost always drag PF down. Tag them in the journal and look at their result separately.
- Recalculate fees. Switching to maker orders or taking fewer but larger trades sometimes adds more to PF than any new entry idea.
Cheat sheet: checking your monthly PF
Five points without which the number can't be trusted.
- Calculated after fees and fundingWithout them PF almost always looks better than it is.
- At least 30 tradesAnd all of them on the same entry logic.
- Broken down by setupAn overall 1.3 can hide a setup with PF 0.7.
- Losses beyond stops — as a separate sumIt's a pure leak, the market doesn't explain it.
- Off-plan trades — separatelyTag them and compare with the rest.
How to calculate your own profit factor
Quickly — in the profit factor calculator: enter the number of winning and losing trades and the average amounts. Precisely — from real trades: Ordo Trade pulls trades from the exchange, deducts fees and funding and shows PF overall, by setup, pair, weekday and entry hour.
In short: frequently asked questions
What profit factor is considered good?
A reference point is 1.5 and above: such a system has a margin for fees and bad periods. Values from 1.0 to 1.5 work but are fragile; below 1.0 the system loses money.
How is profit factor different from win rate?
Win rate shows the share of winning trades, profit factor shows how many times the money made exceeds the money lost. With a 70% win rate a system can lose money, while with 40% it can earn steadily.
Should fees be included in profit factor?
Yes. Both sums are counted after fees and funding, otherwise the figure looks better than it really is.
