Two numbers that answer the only question that matters: is this method making money, and how much per trade? This free lesson covers: Why measure at all, Profit factor, Work it out, Reading it, Expectancy, Work it out, Costs are not optional, Where the numbers come from, Why both numbers, Put it together.
Measuring Your Edge · Learn · Step 1 of 10
Most traders judge a method by how the last few trades felt. That is the least reliable input available — recent outcomes dominate memory regardless of how representative they are.
Two numbers replace the feeling: profit factor tells you whether the method makes money overall, and expectancy tells you how much it makes per trade.
Going deeper
Profit factor and expectancy are the two figures on every professional trading report, and both long predate retail trading — they come from portfolio performance measurement rather than from any particular trading style.
Neither is predictive. They describe a sample of past trades, and their usefulness depends entirely on that sample being large enough and honestly recorded, which is what the last lesson in this module is about.
Above 1.0 is profitable before costs. Values sustained above roughly 1.5 over a large sample are strong. Very high figures usually indicate a small sample rather than an exceptional method.
Profit factor is a ratio over the whole sample — did it make money. Expectancy is an average per trade — how much each trade is worth. You want both.
No — they are part of your real results. Record them and tag them separately, so you can measure the method and your execution independently.