What is Profit Factor calculation? | Forex Factory

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What is Profit Factor calculation?

  • #1
  • First Post: Mar 18, 2011 1:59am Mar 18, 2011 1:59am
Hello, can you help me to find out what is profit factor of the systems and how is it calculated?

PF - 2.65 and PF -5.25 what does it mean?

Will be very appreciated for the answers.
  • #2
  • Mar 18, 2011 8:12am Mar 18, 2011 8:12am
Quoting Oliver_Chart
Hello, can you help me to find out what is profit factor of the systems and how is it calculated?

PF - 2.65 and PF -5.25 what does it mean?

Will be very appreciated for the answers.
The dollar amount a trading strategy made for every dollar it lost.

gross profits / gross losses
  • #3
  • Mar 22, 2011 3:33am Mar 22, 2011 3:33am
Quoting Custos
The dollar amount a trading strategy made for every dollar it lost.

gross profits / gross losses
So easy and that is all!!! Thank you my friend. Appreciated that!
  • #4
  • Mar 24, 2011 4:50am Mar 24, 2011 4:50am
profit factor = gross profit / gross loss
eg. profit of $6000 and a loss of $3000 would give a profit factor of 2.0.

This means that for every $1 risked, you can expect a return of $2.
If something has a profit factor less than 1, eg, 0.9, this means that for every $1 you can expect $0.90 back (i.e the strategy is a losing one!).
If something has a high profit factor, this is a good thing - eg 5.0 ($5 gained for every $1 risked).
  • #5
  • Mar 24, 2011 8:08am Mar 24, 2011 8:08am
Quoting josef
profit factor = gross profit / gross loss
eg. profit of $6000 and a loss of $3000 would give a profit factor of 2.0.

This means that for every $1 risked, you can expect a return of $2.
If something has a profit factor less than 1, eg, 0.9, this means that for every $1 you can expect $0.90 back (i.e the strategy is a losing one!).
If something has a high profit factor, this is a good thing - eg 5.0 ($5 gained for every $1 risked).
Wrong, the vast majority of high profit factors come from curve fitting and they dont last very long. Large returns come from large risks, or impecable timing with huge runs or from the famous 99% win ratio threads. A PF of 2.0 is quite high. Like all things backtested, past results are not an indication of future gains though it does show a particular approach has a chance of standing up and being counted.

RT
  • #6
  • Mar 25, 2011 4:26am Mar 25, 2011 4:26am
Quoting Razor_trader
Wrong, the vast majority of high profit factors come from curve fitting and they dont last very long. Large returns come from large risks, or impecable timing with huge runs or from the famous 99% win ratio threads. A PF of 2.0 is quite high. Like all things backtested, past results are not an indication of future gains though it does show a particular approach has a chance of standing up and being counted.

RT
RT, thank you for additional information.
  • #7
  • Dec 21, 2012 4:19pm Dec 21, 2012 4:19pm
My account has a profit factor of 73. Is this calculated correctly?

It comes to my attention that my PF seems much higher than most the traders, and i am not sure if this is correct...
If you know one thing or two about PF, please let me know.
thanks!

http://www.myfxbook.com/members/Emo2...e-storm/434644
More than a hobby. Never a game. US Client at 1:50.
  • #8
  • Edited 3:48am Dec 22, 2012 12:17am | Edited 3:48am
Oh how I wish I could have a profit factor of 2.

I'm not sure how that guy can have a PF of 73.
  • #9
  • Dec 25, 2012 3:15am Dec 25, 2012 3:15am
that's why i am not sure if the PF 72 is correct or not...
if anyone happen to know the answer, plz let me know. Thanks.
More than a hobby. Never a game. US Client at 1:50.
  • #10
  • Dec 25, 2012 7:29am Dec 25, 2012 7:29am
November Results...

It is that high because you are riding high from good November results. The bulk of your deposits were in November also.
Luckily you survived a +20% drawdown around Dec. 6th-ish. You are holding some losing trades (and your Open Trades are private), but they
happen to be at a peak at the moment (hence your equity is at 93% as of now). So yes, it is probably a legitimate calculation, but not sustainable. Your May to September results were nothing amazing. Likewise, almost half your trades (211/482, 43%) were in November also.
Basically, you took some big swings (comparatively) in November and did well. Let's see how it looks after the next 500 trades.

Trade length time is averaged at 4 days, but... you have trades that exceed one week up to one trade at 60 days.

You haven't taken any large losses (yet)..hence your high win%... and that affects Gross Profit/Gross Loss of course.
I'm not being negative, I wish you the best... and hopefully you can maintain or increase your gains.
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  • #11
  • Edited Dec 26, 2012 3:44pm Dec 25, 2012 4:02pm | Edited Dec 26, 2012 3:44pm
Quoting Chi
that's why i am not sure if the PF 72 is correct or not...
if anyone happen to know the answer, plz let me know. Thanks.
I took a look at your trade history...... You are doing a pretty good job there.
GBP/NZD seem to be your best pair though when you did trade the EUR/AUD you pretty well nailed it too.
Keep up the good work.

Regarding your profit factor , since myfx does all the math for you it appears to be accurate.
  • #12
  • Dec 25, 2012 4:04pm Dec 25, 2012 4:04pm
Quoting Intu
November Results...

It is that high because you are riding high from good November results. The bulk of your deposits were in November also.
Luckily you survived a +20% drawdown around Dec. 6th-ish. You are holding some losing trades (and your Open Trades are private), but they
happen to be at a peak at the moment (hence your equity is at 93% as of now). So yes, it is probably a legitimate calculation, but not sustainable. Your May to September results were nothing amazing. Likewise, almost half your trades (211/482, 43%) were in November...
Your is absolutely correct
  • #13
  • Jan 4, 2013 3:35pm Jan 4, 2013 3:35pm
As now, the profit factor has hit 100.

Thank you for all your inputs. I will keep them in mind and see if account would last for years to come.

Have a good weekend everyone.
More than a hobby. Never a game. US Client at 1:50.
  • #14
  • Sep 15, 2016 7:40am Sep 15, 2016 7:40am
Anybody knows what the pf would be if there are no losses? For example, I made $500 today on 3 trades and had no losses. What would my pf be? 500? 1? Seens like MT4 uses 1 when there are no losses. Not sure if this is the right way to go about it as it will skew future pfs.
  • #15
  • Last Post: Sep 15, 2016 11:50am Sep 15, 2016 11:50am
Quoting Custos
{quote} The dollar amount a trading strategy made for every dollar it lost. gross profits / gross losses
Most frustrating there is that it tells nothing about future just a derivative value from past data..
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