This One Metric Will Dictate the Probability of Your Trading Strategy


When it comes to determining the profitability of a trading strategy, let alone a trading software, there’s one key metric that you want to pay very close attention to. This key metric is exactly the one that will let you know if you’re going to make money in the long term. Without further ado, let’s get straight to it.
Welcome! If you’re new to the channel, my name is Matt Jimenez. I’m an entrepreneur who has worked with the greatest minds in finance over the last several years, and I’m here to pour into you guys everything that they poured into me. In this video, I want to go over one of many metrics that weigh extremely heavily when it comes to determining if a trading strategy or trading software is going to be best suited for you and your portfolio long term.

Now, I know there’s tons of metrics, but some weigh far more than others, and this one weighs extremely heavy. The metric I’m going to be talking about today is the profit factor. If you have never heard what the profit factor is, after this video you should be able to know exactly what it is and how it works. Profit factor is a metric used in trading and investing to evaluate the profitability of a trading system or strategy. It is calculated by dividing the total profit generated by the system by the total losses incurred.

In layman terms, what that means is you are willing to risk one to gain two. So, for every dollar you have at stake, you are earning $2. For example, if I’m risking $5 and my profit factor is 2, I’m looking to gain at least 10, hence two times five. Now, if a trading strategy has generated $10,000 in profits and has only incurred $5,000 in losses, the profit factor would be 2 because 10,000 divided by 5,000 is 2.
A profit factor greater than 1 indicates that the trading system you’re using is actually profitable long term. Anything under a 1 for the profit factor will guarantee you to lose money long term because, in the end, if you’re always risking more than you’re able to gain, you can see how quickly that will end up being a bad scenario for your portfolio.

Now, the profit factor is typically always weighed with many other metrics. These other metrics that go hand in hand with knowing the profit factor are risk to reward ratio and win rate. These are extremely important when weighing the profit factor because all of these things are performance metrics.
So now that you understand a basic overview of profit factor, I want to go over a couple of the actual trading softwares that Nurp has, which you can license, and go over their profit factors. Before we do that, always keep in mind that a bare minimum profit factor is 1 because you always want to be able to gain exactly what you’re risking, never less, always more, but at least the same.
Now with that being said, let’s look at the data.

Okay, so here is my FED Bot, where I have $50,000 in there. If you’re unfamiliar with this account, just hit this link here. This is an entire series where I’ve been documenting this journey of a trading account that I’ve had, but we’re not going to get into that today. Today, I want to look solely at the profit factor. Right here, you can see the profit factor. Up above is the definition: the profit factor shows how many times the gross profit, sum of all winning trades, exceeds the gross loss, sum of all losing trades. The higher the value, the better, of course.

Now, like I said, we always want to shoot for a bare minimum of 1. In this case, this is an extremely good profit factor number. It is 2.20. That’s amazing when it comes to finding a profitable strategy because in the long run, I will always make money unless this number changes, of course. I’m always gaining two times what I’m risking, essentially, so that is a very healthy profit factor. If you’re looking to potentially license any softwares or look at any trading strategies, you always want to evaluate what this number is. If it is a 2.2, then make sure that you are aware you will probably do very well utilizing this software or any software with that number.

Just for a disclaimer, past performance doesn’t indicate future performance. So, as of this current day, June 2nd, the profit factor is 2.2. This may change in the future, or it may not, but as of right now, this is extremely profitable. This is my own personal account, so this has nothing to do with anything that I am selling or anyone is selling. This is my own, and I’m just here to educate you guys on the profit factor.
Now, let’s look at a couple other trading softwares that they have so we can actually see what is the norm across the board for some of the accounts that they are allowing me to look at.

Okay, so this one here we have is the Gold Digger. If you don’t know this one, I made a video on it; the link is here up above. Just make sure to click that if you want to know more about it. But in this video, we’re not going to go over that. We just want to go over the profit factor. In this exact case, it is extremely high once again, sitting at a 2.01, which is extremely good because you guys know what that means: we are gaining two for every one that we’re risking.

Let’s check out the Dalio, which is one of the newer ones that they have. Side note, I’m actually looking to fund one of these accounts with at least $10,000 in there to see how well it does, considering it is a newer trading software that has a really cool built-in strategy that is a hedging strategy. So, it’s playing both sides of the field, both long and short, which is extremely attractive because now you’re hedging against your losers and so forth. But we’re not going to get into that today. Like I said, let’s stick to the profit factor.

The profit factor on the Dalio is arguably the highest one we’ve seen yet and arguably the highest one across the board, sitting at 2.63. That is an extremely high profit factor. Remember, everything above 1 is technically good; the higher the number, the better. Now, this one here is an account that I actually cannot disclaim because it’s still in the works. But as you can see, the profit factor is a 3.56, which is extremely exceptional in comparison and the highest that I’ve ever seen when it comes to using a trading strategy. Again, this account is not one that I can openly speak on, but maybe in future videos, look out for something coming your way.

So, there you have it. We went over a few softwares, including my very own. As you can see, the softwares that they’ve been developing are extremely profitable when it comes to looking at that exact metric. Again, this is all for educational purposes; none of it is financial advice. With that being said, take this knowledge and use it to your advantage when it comes to evaluating trading strategies or softwares that you’re looking to license. Make sure that the profit factor is always above a 1 and utilize that knowledge to your benefit.

If you’re interested in any of the ones that I showed, just go ahead and hit the link down below in the description or in the comments. Please leave me a like, comment, and/or subscribe. As always, my friends, peace.

Please visit This One Metric Will Dictate the Probability of Your Trading Strategy to watch the full video on YouTube!

Search Posts

Latest Posts

Follow Us