Profit Factor

This is a discussion on Profit Factor within the First Steps forums, part of the Reception category; If a system has a profit factor of 4, does this mean that it increases the starting pot by 400% ...

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Old Jan 19, 2007, 12:58pm   #1
 
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Profit Factor

If a system has a profit factor of 4, does this mean that it increases the starting pot by 400% ? Or is it not that straight-forward ?
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Old Jan 19, 2007, 1:08pm   #2
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I calculate profit factor as the total of all winning trades divided by the total of all loosing trades.

I generally calculate this on a fixed position size. If position sizing is then applied to a system it may change the profit factor.

How much a pot increases will depend on how much you're starting with, you're position sizing calculation for each trade, and the profit factor.
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Old Jan 19, 2007, 4:55pm   #3
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Is generally gross profit/gross loss
it is better to look at an adjusted version of this that removes trades that fall outside 2 or 3 std deviations of the average profit or loss in order to stop large single trades scewing overall results.
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