How to read a profit factor
Profit factor is the simplest efficiency number in the set. Add up every dollar won, add up every dollar lost, and divide. A result of 2.4 means the trader collected $2.40 for each dollar they gave back.
Anything above 1.0 is net profitable before fees, and fees matter: on a book with a high trade count, a profit factor of 1.05 can be a loss after costs.
What profit factor hides
Profit factor carries no notion of risk or ordering. A trader whose gross profit came from a single resolved market and a trader who ground out the same total across 200 markets get the same score. Drawdown and expectancy separate them.
It is also unstable on small samples. One large winner can move profit factor from 0.9 to 2.5, which is why it belongs next to the resolved-market count rather than on its own.
How profit factor relates to the grade
Profit factor helps you interpret a trader's results. A value near 1.0 means gross gains barely exceeded gross losses, leaving a narrow margin that trading costs can erase. Read it alongside profit, drawdown and the resolved-market count.
