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PROFIT FACTOR

Total profit divided by total loss.

Published by The Retail Trader · JUL 31, 2026 · Risk Management

Profit Factor — Total profit divided by total loss. Above 1 means the system is net positive.

WHERE THIS FITS IN

This term comes under Risk Management, in the "NUMBERS OF SYSTEM" section. This tells you whether your method is actually working or not:

RELATED TERMS TO READ

Other terms in this group — understanding them together is more useful:
• Win Rate
• Average Win / Average Loss
• Expectancy
• Backtesting
• Forward Test / Paper Trading
• Sample Size
• Edge
• Equity Curve
• Trading Journal

To read the entire group and all its examples at one place, see the journal "RISK MANAGEMENT: DICTIONARY OF AVOIDANCE" - this term has been taken from there.

This entry is for educational purposes only and is not a recommendation to buy or sell. Exchanges change charges, margins, lot sizes and expiry rules from time to time, so verify any figures with your broker or exchange.

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