Profit Factor, Expectancy and Win Rate: The Metrics That Matter
A high win rate feels good and can still lose money. The metrics that decide whether a strategy survives are profit factor, expectancy and the relationship between your average win and average loss. Here is what each one means, in plain terms, and how to read them together.
Win rate: necessary, not sufficient
Win rate is simply the share of your trades that were profitable. It is easy to understand and easy to be fooled by. A strategy that wins 90% of the time but lets the occasional loser run can still bleed out, while a 40% strategy with disciplined losers can compound nicely. Win rate only means something next to the size of your wins and losses.
Average win vs average loss
This is your reward-to-risk in practice: the average size of a winning trade divided by the average size of a losing one. If your average win is 150 and your average loss is 100, the ratio is 1.5. Combined with win rate, this is what actually determines whether you make money.
Expectancy: the number to trust
Expectancy is the average profit or loss you can expect per trade, over many trades. One common way to express it:
Expectancy = (Win rate x Average win) - (Loss rate x Average loss)
If expectancy is positive, the strategy makes money over time and position sizing does the rest. If it is negative, no amount of discipline on a single trade saves it. Expectancy folds win rate and win/loss size into one honest figure, which is why it is the number to watch.
Profit factor: the quick health check
Profit factor is your gross profit divided by your gross loss over a period. Above 1.0 means you made money; the higher, the sturdier the edge.
| Profit factor | Rough read |
|---|---|
| Below 1.0 | Losing money over the period. |
| 1.0 to 1.3 | Marginal. Small mistakes or slippage can tip it negative. |
| 1.3 to 1.6 | A solid, workable edge for most traders. |
| Above 1.6 | Strong, if it holds up across enough trades and market conditions. |
Treat these as rough bands, not rules. A profit factor from twenty trades means little; the same figure over a few hundred trades, across different conditions, means a lot.
Read them together, on real numbers
No single metric is the answer. Win rate without win/loss size flatters you; profit factor without a decent sample fools you; expectancy without volume is noise. The point is to read them together, on your own trades, with commission and swap included so the numbers are honest. That is exactly what TradePulse computes for you: net profit factor, expectancy, win rate and average win versus loss, broken down by session and symbol, updated automatically as your trades sync.
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FAQ
What is a good profit factor?
As a rough guide, above 1.0 is profitable, 1.3 to 1.6 is a solid edge, and above 1.6 is strong if it holds across a large enough sample. Judge it over hundreds of trades and different conditions, not a handful.
Is win rate or expectancy more important?
Expectancy. It combines your win rate with the size of your wins and losses into the average result per trade. A high win rate with oversized losses can still have negative expectancy, which means it loses money over time.
Does TradePulse use net or gross numbers?
Net. Every metric includes commission and swap, so your profit factor, expectancy and win rate reflect what actually hit your account, not an inflated gross figure.