The ratio of gross profits to gross losses. A profit factor above 1.0 indicates profitability. Above 2.0 is considered strong.
Profit Factor = (Win Rate × Average Win) / (Loss Rate × Average Loss). For 55% WR with 1.5:1 RR: (0.55 × 1.5) / (0.45 × 1.0) = 0.825 / 0.45 = 1.83. Most prop firms and trading evaluators consider a profit factor of 1.5+ as sustainable. Below 1.0 means the strategy loses money. Between 1.0-1.3 means the edge is thin and vulnerable to costs and slippage.