TradesMatrix Guide
What Is Profit Factor?
Profit factor compares the total value of winning trades with the total value of losing trades over the same period. It describes historical results; it does not guarantee future profitability.
Formula
Profit Factor = Gross Profit ÷ Absolute Gross Loss
Use totals from the same set of closed trades. If gross losses are zero, the ratio is undefined rather than evidence of a risk-free strategy.
Example
If gross winning trades total ₹5,000 and gross losing trades total ₹2,500, the profit factor is 2.0. This means the recorded gross profits were twice the recorded gross losses in that sample, before considering whether the figures include all costs.
Interpret carefully
- A value above 1 means gross gains exceeded gross losses in the selected historical sample.
- Fees, slippage, taxes, and outlier trades can materially change the result.
- Compare the same strategy and time period, and use enough observations to make the sample informative.
Educational information only, not investment or financial advice. Calculator outputs depend on the inputs and assumptions used; they do not predict results or remove trading risk.