How to increase the profit factor ?
Mar 24, 2013 at 16:26
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8 Replies
Mar 24, 2013 at 16:26
Hello guys,
As I am currently developing some FX automated strategies, i understood how important the profit factor is. Now I would like to know a few things :
-What exactly the profit factor measures ?
-What can we do to increase this ratio ?
-What profit factor ratio determines a 'profitable and stable' EA ? I heard anything above 2 is good.
Thanks !
As I am currently developing some FX automated strategies, i understood how important the profit factor is. Now I would like to know a few things :
-What exactly the profit factor measures ?
-What can we do to increase this ratio ?
-What profit factor ratio determines a 'profitable and stable' EA ? I heard anything above 2 is good.
Thanks !
Mar 26, 2013 at 21:29
Q-What exactly the profit factor measures ?
Profit factor is the total profit earned from winning trades divided by the total losses from losing trade. For example consider a trading system that generated 100 trades, of which 60 were winners and 40 were losers. Now assume the total profit from these 60 was $1000, and total loss from 40 losing trades was $700. Overall the strategy earned $300 ($1000 - $700).
Therefore, the Profit Factor is 1.43 ($1000 / $700)
Profit factor greater than 1 implies the strategy is profitable, less than 1 implies it is a loser.
A good profit factor is above 1.25.
Q-What can we do to increase this ratio ?
Study the entries and exits generated by the trade. Try to cut the losers early on and let the winners ride. Employ break-even and trailing stops and re-evaluate the strategy to see how it performs.
There is no sure-shot way to improve Profit Factor. It is most to study the results, investigate whether the loss from losing trades can be reduced by exiting losing trades early and so it.
Mostly observation and improvisation.
Q-What profit factor ratio determines a 'profitable and stable' EA ? I heard anything above 2 is good.
A profit factor above 1.25 is good, but what matters most is consistency. A couple of large wins can distort profit factor. So, the strategy must produce wins which are consistent - not a couple of large wins.
Another thing you should look at is Payoff Ratio - which is the Average Profit per Winning Trade / Average Loss per Losing Trade. In addition to a decent Profit Factor, you should have a good Payoff Ratio - at least 1.3
Profit factor is the total profit earned from winning trades divided by the total losses from losing trade. For example consider a trading system that generated 100 trades, of which 60 were winners and 40 were losers. Now assume the total profit from these 60 was $1000, and total loss from 40 losing trades was $700. Overall the strategy earned $300 ($1000 - $700).
Therefore, the Profit Factor is 1.43 ($1000 / $700)
Profit factor greater than 1 implies the strategy is profitable, less than 1 implies it is a loser.
A good profit factor is above 1.25.
Q-What can we do to increase this ratio ?
Study the entries and exits generated by the trade. Try to cut the losers early on and let the winners ride. Employ break-even and trailing stops and re-evaluate the strategy to see how it performs.
There is no sure-shot way to improve Profit Factor. It is most to study the results, investigate whether the loss from losing trades can be reduced by exiting losing trades early and so it.
Mostly observation and improvisation.
Q-What profit factor ratio determines a 'profitable and stable' EA ? I heard anything above 2 is good.
A profit factor above 1.25 is good, but what matters most is consistency. A couple of large wins can distort profit factor. So, the strategy must produce wins which are consistent - not a couple of large wins.
Another thing you should look at is Payoff Ratio - which is the Average Profit per Winning Trade / Average Loss per Losing Trade. In addition to a decent Profit Factor, you should have a good Payoff Ratio - at least 1.3
May 16, 2013 at 07:24
wahjay posted:
Hello guys,
As I am currently developing some FX automated strategies, i understood how important the profit factor is. Now I would like to know a few things :
-What exactly the profit factor measures ?
-What can we do to increase this ratio ?
-What profit factor ratio determines a 'profitable and stable' EA ? I heard anything above 2 is good.
Thanks !
Use MM.
Member Since May 20, 2013
1 posts
May 22, 2013 at 21:51
Since I use short time frame (1 minute) and my EA is based on crossovers, I really found that setting a time frame for my EA to trade really increased the profit factor. The EA trades the EUR/USD: 0700-2000 ((GMT + 0:00)).
Steve Magana
Account : EA
May 21, 03 - Present (New Optimization)
Steve Magana
Account : EA
May 21, 03 - Present (New Optimization)
Another day, another dollar!
Aug 07, 2017 at 06:17
MatSol posted:
Q-What exactly the profit factor measures ?
Profit factor is the total profit earned from winning trades divided by the total losses from losing trade. For example consider a trading system that generated 100 trades, of which 60 were winners and 40 were losers. Now assume the total profit from these 60 was $1000, and total loss from 40 losing trades was $700. Overall the strategy earned $300 ($1000 - $700).
Therefore, the Profit Factor is 1.43 ($1000 / $700)
Profit factor greater than 1 implies the strategy is profitable, less than 1 implies it is a loser.
A good profit factor is above 1.25.
Q-What can we do to increase this ratio ?
Study the entries and exits generated by the trade. Try to cut the losers early on and let the winners ride. Employ break-even and trailing stops and re-evaluate the strategy to see how it performs.
There is no sure-shot way to improve Profit Factor. It is most to study the results, investigate whether the loss from losing trades can be reduced by exiting losing trades early and so it.
Mostly observation and improvisation.
Q-What profit factor ratio determines a 'profitable and stable' EA ? I heard anything above 2 is good.
A profit factor above 1.25 is good, but what matters most is consistency. A couple of large wins can distort profit factor. So, the strategy must produce wins which are consistent - not a couple of large wins.
Another thing you should look at is Payoff Ratio - which is the Average Profit per Winning Trade / Average Loss per Losing Trade. In addition to a decent Profit Factor, you should have a good Payoff Ratio - at least 1.3
Thank you so much for this detailed explanation! I had sent in a request to support for an explanation about all the data at the bottom. I suppose I shall be happy with my stats :)
“Believe it can be done. When you believe something can be done, really believe, your mind will find the ways to do it. Believing a solution paves the way to solution.” ― David J. Schwartz
Aug 18, 2017 at 10:25
The best way to increase your profit factor is to have a system with a low consecutive loss expectancy. If you know you won't experience more than 2 straight losses you can then structure you money management so that each loss is followed by an order which exceeds it by 4x. If you hit that order, then your profit factor should be a little over 4.00 :)
@GJscalper for more information
Member Since Apr 13, 2016
14 posts
Aug 20, 2017 at 06:33
Hello WahJay,
i am using the acceptance criteria in one of the forex strategy builders that i have bought year ago FSB Pro from eaforexacademy.com. There is a 14 days free trial you can test it out and basically there from the acceptance criteria you set to generate you strategies with profit factor above a curtain number. You have also access to the code of the exported strategies and it might help you. Cheers
i am using the acceptance criteria in one of the forex strategy builders that i have bought year ago FSB Pro from eaforexacademy.com. There is a 14 days free trial you can test it out and basically there from the acceptance criteria you set to generate you strategies with profit factor above a curtain number. You have also access to the code of the exported strategies and it might help you. Cheers
Aug 28, 2017 at 06:17
Profit factor is an important criteria for EA. It must be above 5 in back-test. It may drop at live trade in most cases. So, most of EA will lose, dealers are happy with EA.
Payoff ratio is a good criteria for EA, but, I put another criteria (my criteria), on strategy tester's result, I watch if 'largest loss trade' < 'average profit trade' ? Otherwise, EA will loss in any long run. So, most of traders loss out; then, they tried to make EA, then, EA will loss out, too.
Payoff ratio is a good criteria for EA, but, I put another criteria (my criteria), on strategy tester's result, I watch if 'largest loss trade' < 'average profit trade' ? Otherwise, EA will loss in any long run. So, most of traders loss out; then, they tried to make EA, then, EA will loss out, too.
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