Profit Factor Explained
Profit factor compares gross profit with gross loss in completed trading history.
The basic idea
Profit factor is calculated by dividing total gross profit by total gross loss, using the absolute loss amount.
What it tells you
A value above 1 means gross profit exceeded gross loss over the reviewed history.
What it does not tell you
Profit factor alone does not explain drawdown, consistency, sample size or whether results were concentrated in a small number of trades.