Win rate is misleading
A strategy with a 70% win rate can be unprofitable. A strategy with a 40% win rate can be exceptionally profitable. The difference is the size of your wins versus your losses.
Profit factor = Gross Profit ÷ Gross Loss.
A profit factor above 1.0 means you're making money. Above 1.5 is solid. Above 2.0 is exceptional and should be scrutinized for overfitting.
Why profit factor matters more
Win rate tells you how often you're right. Profit factor tells you how much being right is worth compared to how much being wrong costs.
Consider two strategies:
- Strategy A: 70% win rate, average win $50, average loss $200 → Profit factor = 0.58 (losing)
- Strategy B: 40% win rate, average win $300, average loss $100 → Profit factor = 2.0 (winning)
Most retail traders chase Strategy A and wonder why they're losing.
How to track it
Edgeely calculates profit factor automatically across any date range, instrument, or setup tag. Filter to your best setup and compare its profit factor to your overall account — that's where to focus your energy.