Costs affect both totals
In our eight-trade example, positive gross results total USD 550 and negative results total −USD 400. Gross profit factor is 1.375. After USD 5 in costs per trade, positive results total USD 530 and negative results total −USD 420. Net profit factor is approximately 1.262.
Do not subtract total fees from winning results alone. Fees can even turn a small winner into a losing trade. To calculate net profit factor, first calculate every trade after costs and then assign it to the appropriate total.
What the number does not describe
A ratio above one means a positive balance for the recorded series on the chosen cost basis. It does not describe sequence, drawdown, committed capital or the number of independent decisions. A handful of trades can produce a very high and unstable value.
The zero-loss case
With zero losing results, there is no finite quotient. Show “no losing trades” together with sample size. If both totals are zero, there is no meaningful result basis. A calculator should explain these cases instead of inventing a replacement number.
Profit factor = sum of positive results / |sum of negative results|
A reproducible example
| Measure | Before costs | After costs |
|---|---|---|
| Sum of winning trades (USD) | 550.00 | 530.00 |
| Absolute sum of losing trades (USD) | 400.00 | 420.00 |
| Balance: wins minus losses (USD) | 150.00 | 110.00 |
| Profit Factor | 1.375 | 1.262 |
USD 550 in wins − USD 400 in losses = USD 150 balance before costs. After 8 × USD 5 in costs, USD 110 remains. Net profit factor first deducts costs from each trade: 530 / 420 ≈ 1.262.
- Balance before costs
- 150.00 USD
- Total costs
- 40.00 USD
- Balance after costs
- 110.00 USD
- Profit factor after costs
- 1.26
- Expectancy per trade
- 13.75 USD
- Max. drawdown
- 175.00 USD
Frequently asked questions
What is a good profit factor?
There is no universal target. Assess the period, sample size, costs, drawdown and stability of the underlying series together.