Profit factor, expectancy and win rate: 3 metrics that reveal your edge
A high win rate doesn’t automatically mean a profitable strategy. We explain how win rate, profit factor and expectancy relate to each other and how to read them on your own data.
Why win rate alone is misleading
Win rate tells you what percentage of your closed trades ended in profit. It says nothing, however, about how much you made on them. A strategy with an 80% win rate can lose money if a single loss wipes out five wins. Conversely, a trader with a win rate of around 40% can be profitable in the long run if their wins are significantly larger than their losses.
Profit factor: how much you make for every dollar you lose
Profit factor is the ratio of gross profit to gross loss over a chosen period. A value of 1 means you are breaking even; anything above 1 is profit. A profit factor above 1.5 is usually considered robust. Values above 3 on a small sample of trades point to luck rather than an edge, so always read it together with the number of trades.
Expectancy: the average result of a single trade
Expectancy (expected value) combines win rate and the size of your wins and losses into a single number: (win rate × average win) − (loss rate × average loss). A positive expectancy means your strategy has a statistical edge. When you express it in multiples of risk (R), you can compare accounts and markets with different position sizes.
How to read the metrics together
No metric holds up on its own. A high win rate with a profit factor below 1 points to small wins and large losses. A low win rate with a positive expectancy is fine, as long as you can withstand longer losing streaks both mentally and financially. What matters is the trend: are your metrics improving month after month, or just fluctuating?
Metrics without manual calculation
In unalyze, win rate and profit factor are calculated automatically from the closed trades of all connected accounts. You can track them by period, account or symbol, so you can immediately see where your results were made and where they slipped away.
