Profit Factor Explained for MT4/MT5 Traders
Profit factor is one of the most useful single numbers in a trading journal — and one of the most misread. It tells you how many dollars you made for every dollar you lost. Here is exactly what it means, how it is worked out from your trades, and the traps to avoid when reading it.
What profit factor is
Profit factor is simply your gross profit divided by your gross loss:
- Gross profit — the sum of all your winning trades.
- Gross loss — the sum of all your losing trades (as a positive number).
So a profit factor of 1.5 means that for every $1 you lost, you made $1.50. A profit factor of 1.0 means you broke even, and anything below 1.0 means the account lost money over the period.
How to read it
| Profit factor | What it suggests |
|---|---|
| Below 1.0 | Losing over this period — losses outweigh wins |
| 1.0 | Break-even |
| 1.0 – 1.5 | Marginally profitable; little room for error |
| 1.5 – 2.0 | Solid, sustainable edge for most traders |
| Above 2.0 | Strong — but double-check the sample size and whether one trade is doing the heavy lifting |
These are rules of thumb, not targets. A very high profit factor over a handful of trades usually says more about luck and sample size than about a durable edge.
How it is calculated in TradingJournal
TradingJournal works out profit factor from your closed trades using the net profit and loss recorded on your account — the figures that actually hit your balance. Because it is based on your real, reconciled history rather than estimates, the number you see reflects what genuinely happened.
Common ways traders misread it
- Too few trades. Over 10–20 trades, profit factor swings wildly. It only becomes meaningful across a larger sample.
- One trade carrying everything. A single outsized win can lift the whole number. If removing your best trade collapses your profit factor, your edge is thinner than it looks.
- Ignoring drawdown. A good profit factor with a brutal equity dip can still be untradeable in practice — see Maximum Drawdown Explained.
- Mixing very different instruments. A blended profit factor across unrelated symbols can hide a strong strategy and a leaky one cancelling out. Look per-instrument too.
Use it alongside other metrics
Profit factor is a summary, not the whole picture. Read it next to your win rate, your average win versus average loss, and your maximum drawdown. Together those tell you not just whether you made money, but whether the way you made it is repeatable.
See your real profit factor
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Get started freeRelated: Maximum Drawdown Explained · Win Rate Is Not the Whole Story