• Free Book
  • Store
    • Books
    • Free First Chapters
    • Free Newsletters
  • Recent Articles

TradingMarkets.com

Quantified Stock Market Trading Strategies & Systems

  • Home
  • New Trading Research
  • Education
    • Articles
      • Connors Research
      • ETFs
      • Options
      • Stocks
      • Volatility
    • Trading Lessons
    • Connors Research
    • Glossary
    • Interview Archive
    • Videos
  • Python
  • Quantamentals
    • Quantamentals: The Next Great Forefront of Trading and Investing
    • Quantamentals Resources
  • Courses
  • Store
    • New Book! The Alpha Formula
    • “Buy The Fear, Sell The Greed” – Best Seller!
    • Swing Trading College 2019
    • Trading Books and Guidebooks
    • Street Smarts
    • Online Trading Courses
    • Private Mentoring with Larry Connors
    • Customized Trading Research
    • Amibroker Strategy Add On Modules
You are here: Home / Stocks / Commentary / What’s Your Profit Factor? Here’s An Assignment For You…

What’s Your Profit Factor? Here’s An Assignment For You…

February 7, 2005 by TradingMarkets Editors

In my last article, I pointed out that there were several elements that should go in to devising a successful trading system. But of the components one should focus on, there is one that is of the utmost importance when evaluating a trading system. Our number one benchmark for constructing a sound, valid system is Profit Factor. In our view it is more important than percentage of winning trades or even total net profits.

Click here to order your copy of The VXX Trend Following Strategy today and be one of the very first traders to utilize these unique strategies. This guidebook will make you a better, more powerful trader.

Profit Factor is simply defined as gross profits divided by gross losses. That’s it in a nutshell, but sometimes the simplest things hold the most value. So let’s imagine your trading system’s gross profit for the past year was $40,000 and your gross losses were $20,000. Your Profit Factor would be 2. ($40k / $20k = 2). The formula is simply giving you a reading as to the difference between your system’s gains as opposed to its losses.

A Profit Factor above 2 is outstanding. Obviously, the larger the number is, the better. For example: a Profit Factor of 3 means your net gains were 3 times greater than your net losses, and anything above 3 is unheard of.

Do you now see how important a component Profit Factor is when devising a valid trading system? This information can literally make or break a strategy and should always be considered before trading. Here’s an assignment for you: go back and research your current trading strategy and figure out its Profit Factor for the past year. You should shoot for a number above 1. The closer your number is to 2 the better, with anything above 2 being excellent.

At the Swing Trading College, nearly every method we teach you has a 10+ year Profit Factor of above 3. Some of the systems we will give you have Profit Factor readings of 10 or higher when applied to stocks. Good luck and good trading.

Steven Primo

stevep@tradingmarkets.com

P.S. Join me for an intense 14-week swing trading program in which I’ll cover six statistically-backed systems.

Click here
for the details.

Filed Under: Commentary, Recent

Buy The Fear, Sell The Greed

Buy The Fear, Sell The Greed

Swing Trading College

New Book From Larry Connors and Chris Cain, CMT – "The Alpha Formula; High Powered Strategies to Beat The Market With Less Risk"

We’re excited to announce the release of a new investment book written by Larry Connors and Chris Cain, CMT. The book, “The Alpha Formula; High Powered Strategies to Beat The Market With Less Risk “ combines… Hedge fund legend Ray Dalio’s brilliant insight into combining uncorrelated strategies… With new, minimally correlated, quantified, systematic strategies to trade… [Read More]

Buy The Alpha Formula Now

Connors Research Traders Journal (Volume 57): 7 Real-World Reasons Why Short Strategies Should Be Included In Your Portfolio

In our new book, The Alpha Formula – High Powered Strategies to Beat the Market with Less Risk, we show the benefits of including short-strategies in your portfolio. As a reminder, building portfolios should be based on First Principles – otherwise known as truths. These truths are: Markets Go Up Market Go Down Markets Go… [Read More]

Company Info

The Connors Group, Inc.
185 Hudson St., Suite 2500
Jersey City, NJ 07311
www.cg3.com

About Us

About
Careers
Contact Us
Link To Us

Company Resources

Help
Privacy Policy
Return Policy
Terms & Conditions

Properties

TradingMarkets
Connors Research

Connect with TradingMarkets

Contact

info@cg3.com
973-494-7311 ext. 628

Free Book

Short Term Trading Strategies That Work

© Copyright 2020 The Connors Group, Inc.

Copyright © 2023 · News Pro Theme on Genesis Framework · WordPress · Log in