Win rate, profit factor, and payoff ratio

Win rate tells you how often closed trades were profitable under a particular test. It says nothing about the size of wins, losses, costs, or the order in which trades occurred. A high win rate can coexist with a rare but severe loss.

A low win rate can also be viable when winners are sufficiently larger than losers and the losing streak is affordable.

Profit factor compares gross profit with gross loss. It is useful for comparing like-for-like tests, but it becomes less informative when the sample is small, costs are omitted, or a few outliers dominate the total.

Average win divided by average loss helps explain the rhythm of a system. Pair it with win rate and expected streaks to understand whether the strategy fits the operator and account constraints.

Metrics are descriptions of a sample, not guarantees about the next sample. The more decisions made after viewing the metrics, the more important independent validation becomes.