Profit Factor

[rjay]

If a system has a profit factor of 4, does this mean that it increases the starting pot by 400% ? Or is it not that straight-forward ?

 

[Tuffty]

I calculate profit factor as the total of all winning trades divided by the total of all loosing trades.

I generally calculate this on a fixed position size. If position sizing is then applied to a system it may change the profit factor.

How much a pot increases will depend on how much you're starting with, you're position sizing calculation for each trade, and the profit factor.

 

[TWI]

Is generally gross profit/gross loss
it is better to look at an adjusted version of this that removes trades that fall outside 2 or 3 std deviations of the average profit or loss in order to stop large single trades scewing overall results.