Profit Factor Explained: The #1 Metric for Evaluating Trading Robots

What Is Profit Factor in Trading?

If you trade with Expert Advisors on MetaTrader 5, you've probably seen the term profit factor in backtest reports and live account dashboards. It's one of the first numbers experienced traders look at — and for good reason.

Profit factor is a ratio that measures the relationship between how much a trading system wins versus how much it loses. It's calculated by dividing gross profit by gross loss (expressed as an absolute value). At BLODSALGO, we consider profit factor the single most reliable quick-check metric when evaluating any Expert Advisor, including our own products like Growth Killer and Pivot Killer.

A profit factor of exactly 1.0 means the system broke even — it won exactly as much as it lost. Anything above 1.0 means the system is net profitable. Anything below 1.0 means it's a net loser.

Simple, right? But as with most things in trading, the devil is in the details. Let's break it down completely.

The Profit Factor Formula (With Examples)

The profit factor formula is straightforward:

Profit Factor = Gross Profit ÷ Gross Loss

Let's look at a concrete example. Suppose an EA generates the following results over 6 months:

• Total winning trades: $15,000
• Total losing trades: $10,000
• Profit factor: $15,000 ÷ $10,000 = 1.50

This means for every $1.00 the system lost, it earned $1.50 in return. That's a healthy ratio for a live trading system.

Now consider a second EA:

• Total winning trades: $50,000
• Total losing trades: $48,000
• Profit factor: $50,000 ÷ $48,000 = 1.04

While technically profitable, a profit factor of 1.04 leaves almost no margin for error. One bad week could flip this system into negative territory. Slippage, spread widening during news events, or a small change in market conditions could erase that thin edge entirely.

Here's a third scenario that many beginners misunderstand:

• Total winning trades: $5,000
• Total losing trades: $1,000
• Profit factor: 5.00
• Total trades: 12

A profit factor of 5.0 looks incredible — until you notice only 12 trades were taken. With such a small sample size, this number is statistically meaningless. You need at least 100–200 trades (ideally 500+) before profit factor becomes a reliable indicator.

What Is a Good Profit Factor?

This is the question every trader asks, and the answer depends on the context. Here are general benchmarks based on industry standards and our experience running live accounts at BLODSALGO:

Profit Factor	Rating	Interpretation
Below 1.0	❌ Losing	System loses money — do not trade live
1.0 – 1.2	⚠️ Marginal	Barely profitable; likely unprofitable after fees and slippage
1.2 – 1.5	✅ Decent	Acceptable for high-frequency systems with many trades
1.5 – 2.0	✅ Good	Solid performance for most EA strategies
2.0 – 3.0	🟢 Very Good	Strong edge; sustainable in live conditions
Above 3.0	🔍 Investigate	Suspicious in live; may indicate curve-fitting, low trade count, or martingale

A common mistake is assuming higher is always better. A profit factor of 8.0 on a backtest almost always means the system is overfitted to historical data. It looks great on paper but falls apart in live trading because it was optimized to fit past price action perfectly — a phenomenon known as curve-fitting.

The sweet spot for a robust, tradeable system is typically 1.3 to 2.5 on live accounts with 200+ trades. This range indicates a genuine statistical edge without over-optimization.

Profit Factor vs Other Trading Metrics

Profit factor doesn't exist in a vacuum. Smart traders evaluate it alongside several other metrics to get the full picture. Here's how profit factor compares to other key performance indicators:

Metric	What It Measures	Limitation	Use With Profit Factor?
Win Rate	% of trades that are winners	Ignores trade size; 90% win rate with huge losses = disaster	Yes — context for PF
Max Drawdown	Largest peak-to-trough decline	Shows worst case, not average risk	Essential companion
Sharpe Ratio	Risk-adjusted return	Assumes normal distribution of returns	Yes — advanced analysis
Recovery Factor	Net profit ÷ max drawdown	Needs sufficient trading history	Yes — shows resilience
Expected Payoff	Average profit per trade	Doesn't account for variance	Useful supplement

Win rate and profit factor together tell the real story. An EA with a 40% win rate and a profit factor of 1.8 is actually more robust than one with a 90% win rate and a profit factor of 1.1. Why? Because the first system has large winners and small losers — a sustainable edge. The second system wins often but gets destroyed by occasional large losses (a pattern common in martingale and grid strategies).

Max drawdown is profit factor's essential partner. A system with a profit factor of 2.0 but 60% max drawdown is far riskier than one with a profit factor of 1.5 and 8% max drawdown. The second system lets you sleep at night.

For a deeper dive into reading all these metrics together, check our guide on how to read MT5 backtest results.

How to Calculate Profit Factor in MT5

MetaTrader 5 calculates profit factor automatically in both the Strategy Tester (for backtests) and in the trading history tab (for live accounts). Here's where to find it:

In the Strategy Tester (Backtesting)

1. Open MT5 and navigate to View → Strategy Tester
2. Configure your EA, symbol, timeframe, and date range
3. Run the backtest
4. Click the Backtest tab when it finishes
5. Look for "Profit Factor" in the summary statistics

In Live Account History

1. Go to the Toolbox panel at the bottom of MT5
2. Click the History tab
3. Right-click anywhere in the history and select Report
4. The generated report includes profit factor among other statistics

Manual Calculation From Trade History

If you want to calculate profit factor for a specific period or subset of trades, export your trade history to Excel or CSV and use this formula:

= SUM(all positive P/L values) / ABS(SUM(all negative P/L values))

This gives you the raw profit factor. For a more nuanced view, you can also calculate rolling profit factor — measuring the ratio over a moving window of, say, 50 trades. This shows how the edge evolves over time and can reveal whether performance is degrading.

Common Profit Factor Mistakes (And How to Avoid Them)

After years of developing and testing Expert Advisors at BLODSALGO, we've seen these profit factor mistakes repeatedly:

Mistake 1: Trusting Backtest Profit Factor Blindly

A backtest profit factor of 3.5 means nothing if the backtest was run on poor-quality data, with unrealistic spread settings, or over a cherry-picked date range. Always verify with:

• 99.90% tick data quality (use Tick Data Suite or similar)
• Realistic spread and commission settings matching your broker
• At least 5–10 years of data to cover multiple market regimes
• Out-of-sample testing on data the EA has never seen

Mistake 2: Ignoring Trade Count

As we mentioned earlier, profit factor is only statistically significant with enough trades. A profit factor of 2.5 on 30 trades tells you almost nothing. A profit factor of 1.6 on 2,000 trades tells you a lot. The minimum threshold we use at BLODSALGO is 200 trades for any meaningful evaluation.

Mistake 3: Comparing Across Different Strategies

A scalping EA that takes 50 trades per day will naturally have a lower profit factor (1.2–1.5) than a swing trading EA that takes 2 trades per week (1.5–2.5). This doesn't make the scalper worse — it's just the nature of high-frequency strategies. Compare EAs within the same category.

Mistake 4: Not Accounting for Market Conditions

An EA might show a profit factor of 2.0 during trending markets but drop to 0.8 during ranging conditions. Check profit factor across different market phases — trending, ranging, and volatile periods. This is why tracking EA performance over time is essential.

Real Profit Factor Data: BLODSALGO Expert Advisors

We believe in transparency. Here are the verified profit factor numbers from our live trading accounts — not backtests, not demo accounts, but real money on real markets:

Expert Advisor	Profit Factor (Live)	Total Growth	Max Drawdown	Trade Count	Strategy Type
Growth Killer	1.68	+159.72%	17.42%	1,200+	Multi-symbol trend
Pivot Killer	1.52	+83.21%	12.85%	900+	XAUUSD breakout
Stability Killer AI	1.41	+21.16%	4.08%	600+	ML-based AUDCAD

Notice how Stability Killer AI has the lowest profit factor of the three (1.41) but also the lowest max drawdown at just 4.08%. This illustrates an important principle: profit factor and risk are always a tradeoff. A conservative, machine-learning-based system that prioritizes capital preservation will naturally have a lower profit factor than an aggressive multi-symbol trend follower.

All these results are verified through MQL5 Signals and live account monitoring. We encourage every trader to verify EA claims independently — if a vendor won't show live results, that's a major red flag.

For a complete breakdown of how we track and report these numbers, see our guide on the 7 metrics that actually matter for EA performance.

How to Use Profit Factor When Choosing an EA

Here's a practical checklist you can use when evaluating any Expert Advisor — whether it's from BLODSALGO, the MQL5 Market, or any other vendor:

1. Check if profit factor is from live or backtest data. Live data is always more reliable. Backtests can be manipulated.
2. Verify the trade count. Minimum 200 trades for statistical significance. 500+ is ideal.
3. Look at the time period. A profit factor measured over 3 months is less meaningful than one measured over 2+ years.
4. Compare profit factor with max drawdown. The ratio between these two tells you about risk-adjusted performance.
5. Check for consistency. A stable profit factor of 1.5 every quarter is better than one that swings between 0.8 and 3.0.
6. Ask for the monthly breakdown. How many months were profitable vs unprofitable? What's the worst month?
7. Beware of martingale. Grid and martingale EAs can show profit factors of 2.0+ for months before a single catastrophic loss wipes everything. These strategies inflate profit factor artificially until they blow up.

If an EA vendor shows you a profit factor above 3.0 on a "live" account, dig deeper. Ask for the full trade history, check for lot size manipulation, and verify the account is real — not a demo account disguised as live.

Frequently Asked Questions About Profit Factor

What profit factor do professional traders target?

Most professional systematic traders and hedge funds consider a profit factor between 1.3 and 2.0 on live trading to be solid. Anything consistently above 2.0 over thousands of trades is considered exceptional. The key word is consistently — over years, not weeks.

Can profit factor be negative?

No. Profit factor is always a positive number (or zero if there are no losing trades). A profit factor below 1.0 indicates a losing system, but it never goes negative because it's a ratio of two absolute values.

Is a high win rate or high profit factor more important?

Profit factor is more important because it accounts for both the frequency and the size of wins and losses. A 90% win rate with tiny wins and massive losses will have a poor profit factor. A 35% win rate with large wins and small losses can have an excellent profit factor. The profit factor tells the complete story; win rate alone does not.

How does spread affect profit factor?

Spread directly reduces your gross profit and increases your gross loss on every trade. A system that shows a profit factor of 2.0 on a 0.5-pip spread might drop to 1.4 on a 2.0-pip spread. This is why broker choice and account type (Raw Spread vs Standard) matter enormously for EA trading.