1. Profit Factor
Profit Factor is one of the most important trading metrics. It tells you if your winning trades are substantial enough to overcome your losing trades.
The formula is:
Gross Profit (Total fromallwins)/GrossLoss(Total from all losses)
- A Profit Factor greater than 1.0 means your strategy is profitable.
- A Profit Factor of 2.0 means you make $2 for every $1 you lose.
- A Profit Factor less than 1.0 means your strategy is unprofitable.
2. Trade Expectancy
Expectancy tells you what you can expect to make or lose, on average, for every single trade you take. It combines your win rate with your average win and loss sizes to give you a powerful metric for the viability of your strategy.
💡 A positive expectancy means your strategy has a positive edge over the long term, even if you have losing trades.