When you open the MetaTrader 5 Strategy Tester report, you’re faced with a list of figures that can feel intimidating. Knowing which ones really matter, starting with profit factor, lets you judge a strategy in a minute without being fooled by numbers that only look good.
What is profit factor?
Profit factor is one of the most useful metrics for summing up a strategy in a single number. It’s calculated by dividing the total amount won by the total amount lost (in the report, Gross Profit divided by Gross Loss):
- A profit factor of 1.0 means you win exactly as much as you lose (you break even, before costs).
- Below 1.0, the strategy loses money.
- Above 1.0, it makes money. The higher it is, the more you win for every euro you lose.
What is a good profit factor?
As a rough guide, a profit factor above 1.3–1.5 already points to a strategy with a reasonable margin, and higher values are better… up to a point. Here’s the catch: an extremely high profit factor in a backtest (say, 4 or 5) is usually a red flag, not a sign of excellence, because it’s often the result of over-optimization. Realistic, sustainable figures tend to be more modest.
The other Strategy Tester metrics that matter
Profit factor doesn’t work on its own. These are the figures in the report worth reading together:
- Net profit (Total Net Profit): everything won minus everything lost. The bottom line for the period.
- Maximum drawdown (Balance Drawdown Maximal and Equity Drawdown Maximal): the largest drop the account suffered. Perhaps the most important of all; we’ve devoted a whole article to what drawdown is.
- Number of trades (Total Trades): with only a few trades, the statistics are worth little. The more trades, the more reliable the sample.
- Win rate (Profit Trades, the percentage of winning trades): careful, it isn’t everything. You can make money while being right less than half the time if the winners are big and the losers small (that’s where the trailing stop comes in).
- Recovery factor: relates profit to drawdown; it measures efficiency relative to risk.
- Sharpe ratio: measures return adjusted for volatility.
A high profit factor with a huge drawdown and only 20 trades doesn’t mean anything good. The metrics are read together: return, risk and sample size, all at once.
How not to be fooled by a backtest report
The usual trick is to show only the flattering metrics (net profit and profit factor) and hide the risk (drawdown) and the robustness (out-of-sample tests, number of trades). An honest report shows them all, even if some of them don’t look spectacular. That transparency, paradoxically, is what sets a serious strategy apart.
Frequently asked questions
Is a higher profit factor always better?
Up to a point. A value above 1.3–1.5 is reasonable, but an extremely high profit factor in a backtest is usually a sign of over-optimization, not quality. It’s best read alongside the drawdown and the number of trades.
Does the win rate matter?
It matters, but it isn’t decisive. You can be profitable while being right less than half the time, as long as your winning trades are bigger than your losing ones. That’s why it’s read together with profit factor and how exits are managed.
Where do I find these metrics in MetaTrader 5?
In the Strategy Tester report, which the platform generates after running a backtest on historical data for the symbol and timeframe you chose.
AUREUM shows the full report
We publish the real metrics from the MetaTrader 5 Strategy Tester (profit factor, drawdown, number of trades and more) exactly as the platform generates them. The numbers, unfiltered.
See AUREUM’s metrics →