Profit factor is calculated as total gains from winning trades divided by total losses from losing trades. A profit factor of 1.0 means a strategy's wins and losses exactly offset (break-even before any costs); above 1.0 means genuine profitability; below 1.0 means the strategy loses money net of its own trades, regardless of how good the win rate looks in isolation.
It's a more complete picture than win rate alone, because it captures the size of wins versus losses, not just how often each happens. A strategy that wins only 35% of the time can still have a strong profit factor if its average winner is several times larger than its average loser (the classic trend-following shape), and a strategy that wins 70% of the time can have a weak profit factor if its rare losses are disproportionately large.
zengtrade's go-live readiness bar requires a minimum profit factor (alongside a minimum trade count and multi-regime evidence) before a strategy is even considered for live-execution eligibility.
Educational content, not investment advice. zengtrade is paper-first and non-custodial.