Is a 2.0 or Greater Profit Factor Unrealistic ??????

Discussion in 'Risk Management' started by aeliodon, Aug 2, 2007.

  1. Lets face it the Goal in Trading is not just to win but to win with the larges ratio of gains to losses (iow Profit Factor) possible.

    I can't seem to get mine past 2.0. Its in the 1.0-1.5 range and I kinda feel embarrassed at what I feel is a razor thin edge.

    So I ask is a long term profit factor of 2.0 or greater possible? I only ask because I've never seen it before or heard of it before because no one talks about it and no one in the P/L thread would post such info.

    Another question I have is that the more frequently you trade, the less your profit factor because you simple don't hold winners long enough to become huge and more than make up for commisions and small losses. Also the more you trade the more small costs like commisions play a huge factor on the loss side.

    It seems this is an issue nobody wants to talk about because everyone wants to quote number about how much money they made or some fund made but nobody wants to talk about what the gains to losses or reward to risk ratio is.
  2. maxpi


    Well, everything about trading is a math problem to me. I find that complex math it does not have to be but nonetheless, it's a math problem. If you trade very frequently your profit factor does not have to be outstanding to provide the income you think you should be making from your account. If you trade less frequently you need the bigger profit factor. If you can increase the profit factor without decreasing your trade frequency, that is one avenue you should explore obviously.

    I've developed lots of systems. To me, the comfort zone is >65% profitable trades and 1.5 or greater avg win / avg loss. If I had a system that had 45% winners and 1.5 avg win / avg loss I would not be comfortable, there is a possibility it would lose over time, it could be a good system that I would be running in a drawdown sometimes and sometimes not.. not a real good solution.. at 1.5 win/loss and 50% winners it starts to be a good system that might have a drawdown but not an extended or severe one, it just could get off to a weak start but probably over time it would be fine..
  3. empee


    what time frame

    what instrument
  4. maxpi


    I've seen posts by guys that waited for 3:1 setups. They never said what their edge was or their win rate but they seemed to be happy with that.