Profit factor and expected payoff meaning.

danielsoy

Sergeant
Messages
161
hi ppl.

watching my demo account statement (attached), found two lines that i don´t understand:

profit factor, and expected payoff.


Would like to know its meaning, and its importance related with my trading style, just to give it a
name...:p


Thanks a lot.
 

Attachments

WatanFX-Rep

WantanFX Representative
Messages
64
Profit.Factor = Gross.Profit/Gross.Loss

Expected.Payoff = Net.Profit/N
Where Net.Profit = (Gross.Profit - Gross.Loss) and N = # of trades

Read more: forums.babypips.com/newbie-island/34793-profit-factor-v-s-expected-payoff.html
 

simonnash

Recruit
Messages
7
Profit Factor

The Profit Factor is the ratio of the net profit versus the net loss. This ratio shows by how much the profit exceeded the loss. For example, a value greater than 1 means the strategy has generated more profits than losses.

Profit Factor = Gross Profit / Gross Loss


Expected Payoff

Amount of average money earned from all closed position. Calculated as net profit divided by total positions number... For example: you made 100 trades in one month and made a Total Net Profit of 1800 US Dollars. That means your Expected Payoff is 18 US Dollars (1800/100) per trade.

Expected Payoff = Total Net Profit / Total Number of Trades
 

Talar

Private, 1st Class
Messages
44
Forecasting is the most important stage in trading and besides that we analyze the market itself and try to understand what will happen to the price of this or that asset. We also need to understand how much it costs to invest in each particular position and how much we will be able to earn from it.
 

Thoris

Corporal
Messages
115
Just as a trader should be able to evaluate risks, especially at Forex, where you risk not only the amount that is involved in an open order, but the entire free margin.
Here you have to be really careful and think over your every step. A good profit is great, but you also have to keep the risks under control.
 
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