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Profit Factor Calculation


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Profit Factor Calculation

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NJAMC's Avatar
 NJAMC 
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I am wondering what people think about Profit Factor. My issue is due to the formula:

$profit/$lost for a period

So, although mathematically, when $lost=0 this value approaches infinite. What is typically reported in this case when $lost=0?

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 treydog999 
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NJAMC View Post
I am wondering what people think about Profit Factor. My issue is due to the formula:

$profit/$lost for a period

So, although mathematically, when $lost=0 this value approaches infinite. What is typically reported in this case when $lost=0?

I think it gives null or divide by zero error when i calculate it in spreadsheet form. I think in my platform it goes wacky like 1000 or something. I guess you could just always have a denominator to eliminate that or come up with a flag if that does occur.

Just as a general thoughts on PF. I really like it as a measure, i think its one of the top 3 things I look at because it is risk adjusted and easy to compare against other systems. If I ever did have a system where I didn't take at least 1 loss and not have an error, I would be highly suspicious anyway.

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 NJAMC 
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treydog999 View Post
I think it gives null or divide by zero error when i calculate it in spreadsheet form. I think in my platform it goes wacky like 1000 or something. I guess you could just always have a denominator to eliminate that or come up with a flag if that does occur.

Just as a general thoughts on PF. I really like it as a measure, i think its one of the top 3 things I look at because it is risk adjusted and easy to compare against other systems. If I ever did have a system where I didn't take at least 1 loss and not have an error, I would be highly suspicious anyway.

Thanks,

I was wondering if there was some generally acceptable answer. I can screen for a $0 loss and replace the value with something. I was thinking around 1000 and might use that value. I would be suspicious as well with the value unless I was only expected a very rare trade due to the strategy. Just want to be able to handle the exceptions correctly (or as well accepted).

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