# What Is Profit Factor and What's a Good Number > Profit factor is the most informative single number for evaluating a trading strategy. Here is what it means, how to calculate it, and what level you should be targeting. **Tags:** profit-factor, metrics, analytics, performance **URL:** https://traderjournal.app/trading-metrics/what-is-profit-factor-good-number --- # What Is Profit Factor and What's a Good Number Profit factor is a single number that summarizes whether a trading strategy is producing more than it is losing. It combines win rate and average win/loss size into one ratio that is easier to interpret than either metric alone. --- ## The Calculation Profit factor = Gross profit / Gross loss Where: - Gross profit = sum of all winning trades - Gross loss = sum of all losing trades (as a positive number) **Example:** Over 100 trades: - 55 winning trades totaling $8,250 gross profit - 45 losing trades totaling $5,500 gross loss Profit factor = $8,250 / $5,500 = 1.50 --- ## Interpreting Profit Factor **Below 1.0:** The strategy is losing money overall. For every dollar lost, you are making less than a dollar back. Negative expectancy. **Exactly 1.0:** The strategy breaks even before costs. After spread and commission, it loses money. **1.0 to 1.25:** Marginally profitable but fragile. A slight deterioration in win rate or average win size can push it below 1.0. Most retail traders who are "roughly breakeven" sit in this range. **1.25 to 1.5:** Solid performance. This is the range where many consistently profitable retail strategies operate. Provides enough cushion above breakeven to absorb normal variance and costs. **1.5 to 2.0:** Strong performance. A strategy producing 1.5-2.0 profit factor consistently is performing well above the retail average. **Above 2.0:** Exceptional. Strategies that maintain 2.0+ over large samples (200+ trades) are genuinely high-performing. Be skeptical of profit factors above 2.5 with small samples - they may reflect lucky runs rather than a robust edge. --- ## Profit Factor vs Win Rate The advantage of profit factor over win rate is that it incorporates both frequency and size of outcomes. Trader A: 65% win rate, profit factor 0.9 (losing despite high win rate because small wins, large losses) Trader B: 40% win rate, profit factor 1.6 (profitable despite low win rate because large wins, small losses) Profit factor immediately tells you who is making money. Win rate alone does not. --- ## The Stability of Profit Factor Over Time A single month of strong profit factor can be attributed to luck. Three to six months of consistent profit factor above 1.3 across different market conditions begins to indicate a real edge. This is why tracking profit factor monthly in your journal over many months is more valuable than evaluating any single period. If your profit factor is stable (varies between 1.3 and 1.7 across multiple months), you have evidence of consistency. If it swings between 0.7 and 2.4 month to month, your results are highly variable and dependent on favorable conditions. --- ## Profit Factor by Setup Type Breaking down profit factor by setup tag in your journal is one of the most revealing analyses available. You might find: - Breakout trades: profit factor 1.8 - Pullback trades: profit factor 1.4 - Reversal trades: profit factor 0.7 This tells you that your reversal trades are dragging down your overall results. Removing them (or fixing the criteria) would increase your overall profit factor immediately. --- Trader Journal shows profit factor in the main stat tiles on both the Dashboard and Reports tab. Filter by date range and track how it trends over time. Download at android.traderjournal.app or ios.traderjournal.app.