Profit factor is total gains divided by the absolute total losses of closed trades. It does not describe open positions.
Win rate is only part of the equation
Many small wins can be outweighed by a few large losses. Without average gains, average losses and costs, win rate says little about the overall result. Also distinguish planned reward-to-risk from the realized ratio.
A result needs its denominator
Inspect total losses first. With zero losses, division is undefined; “infinite” is not a reliable quality claim. A small sample may contain no losing trade by chance. Examine the count and distribution of trades rather than comparing one isolated number.
Read metrics together
A report should also show drawdown, average trade, test period and cost assumptions. One large winning trade can dominate profit factor. A sensitivity check excluding that outlier supplements, rather than replaces, the full report.
A practical example
Arithmetic example before costs: 70 wins of €10 total €700. 30 losses of €30 total €900. Win rate: 70%. Profit factor: 700 ÷ 900 ≈ 0.78. Total result: −€200. Average trade: −€2. These are not results from a REVENQOR system.
For your next test
- State gross/net basis and fee treatment.
- Inspect sample size and outliers.
- Assess open risk separately through equity.
Common question
What is a good profit factor?
There is no universal approval threshold. Sample size, risk, costs and stability outside development data all matter.
Sources & further reading
Educational content, not investment advice. Numerical examples are hypothetical, not results of a REVENQOR system.
Continue learning
Understanding drawdown: depth and recovery →
What makes a backtest useful? →
Explore Systems Lab ↗