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Profit Factor
This is a discussion on Profit Factor within the First Steps forums, part of the Start Here 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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Jan 19, 2007, 8:58am
| #1 |
| Member Join Date: Jun 2003 Location: Bath Posts: 88
| 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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Jan 19, 2007, 9:08am
| #2 |
| Senior Member Join Date: Oct 2003 Posts: 441
| Re: Profit Factor
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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Jan 19, 2007, 12:55pm
| #3 |
| Legendary Member  Join Date: Jan 2004 Location: London Posts: 2,484
 | Re: Profit Factor
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.
__________________ "I refuse to tiptoe quietly through life only to arrive safely at death" |
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