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| How is Profit Factor calculated |
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[SunSun]
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| Post subject: How is Profit Factor calculated |
Post rating: 0
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Posted: Mon 06 Dec, 2010, 20:29
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User rating: 0
Joined: Thu 02 Dec, 2010, 16:55
Posts: 15
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I ran 8 tests.
Pass 1:
Equity: 54,094.41
Profit/Loss: 4,094.41
Balance:54,094.41
Total Trades:5
Profit Factor 5.07
Pass 2:
Equity: 54,218.99
Profit/Loss: 4,218.99
Balance:54,218.99
Total Trades:5
Profit Factor 5.03
Given the same number of trades, why does the smaller balance have a larger profit factor? I'm just curious how profit factor is calculated, doesn't make much sense to me as is.
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API Support
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| Post subject: Re: JFOREX-2610 How is Profit Factor calculated |
Post rating: 0
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Posted: Tue 11 Jan, 2011, 08:18
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User rating: ∞
Joined: Fri 31 Aug, 2007, 09:17
Posts: 6139
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The profit factor (PF) is always a positive value.
The PF is a ratio between the sum of all the win trades (Gross profit) and the sum of all the loss trades (Gross loss).
If the Gross profit = 1000.00 and the Gross loss = -250.00
then the PF = (1000.00 / 250.00) = 4.00
It's a normal case when the smaller balance has the larger PF value:
Initial balance 50,000.00
Case 1:
Gross profit = 1000.00
Gross loss = -500.00
Balance: 50,500.00
PF = 2.0
Case 2: we have the smaller balance with the greater PF value.
Gross profit = 100.00
Gross loss = -25.00
Balance: 50,075.00
PF = 4.0
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