Glossary term
Profit Factor
Gross profits divided by gross losses.
Profit factor measures how much a trading strategy makes on winning trades relative to how much it loses on losing trades. A value above 1 means winners exceed losers before considering whether the sample is large enough or stable.
Example: A profit factor of 1.20 means the strategy made $1.20 on winning trades for every $1.00 lost on losing trades.