What profit factor means
Profit factor is gross profit divided by gross loss. A value above 1 means the tested winners outweighed the tested losers in aggregate. A higher number can indicate more historical profit relative to loss, but the metric can be distorted by a small trade sample or one unusual period.
What maximum drawdown means
Drawdown describes the decline from a prior equity or balance peak to a later trough. It helps show how much deterioration occurred during the test, which can matter as much as the ending profit for traders with hard account-loss limits.
Why win rate is not enough
A strategy can win frequently and still lose money if its losses are much larger than its wins. Another system can have a lower win rate and still be profitable if winning trades are sufficiently larger than losses. The payoff distribution matters.
Trade count matters
A metric calculated from a handful of trades is much less informative than the same metric observed over a larger sample. More trades do not guarantee robustness, but they provide more observations of how the rules behaved.
Look at the metrics as a set
- Net result: what the test ended with
- Profit factor: gross winning value relative to gross losing value
- Drawdown: how severe the decline was along the way
- Win rate: how often trades closed profitably
- Average win and loss: the size relationship between outcomes
- Trade count: how much data produced the statistics
Historical does not mean expected
All of these figures describe a historical simulation. They can help compare settings and understand risk behavior, but they are not a forecast of future returns. The Smooth Operator FX backtest page shows its reference metrics with that distinction made explicitly.