Trading performance terms: net P&L, win rate, profit factor, expectancy and R
What gross and net P&L, win rate, average win and loss, profit factor, expectancy, R-multiples, drawdown, MAE and MFE mean, with one worked example and how to read them together.
Your journal is full of numbers: net P&L, win rate, profit factor, expectancy. Each one answers a different question, and each one can fool you when read alone. Here's what they mean, how to calculate them and how to read them together, using one simple example all the way through.
The example
Say you took 20 trades this month: 9 winners averaging $150 and 11 losers averaging $80, with $60 of commissions and fees in total.
Gross and net P&L
- Gross P&L: the result from prices alone. 9 × $150 − 11 × $80 = $1,350 − $880 = $470.
- Net P&L: gross minus commissions and fees. $470 − $60 = $410. This is the number that matters, and the one your prop firm counts.
The more often you trade, the bigger the gap between the two.
Win rate
Win rate = winning trades ÷ all trades. Here, 9 ÷ 20 = 45%. On its own it tells you very little. Plenty of profitable traders win less than half their trades, and plenty of losing traders win 70%, because their few losses are huge.
Average win, average loss and the ratio
Average win is $150 and average loss is $80, so the ratio is about 1.9 to 1: your winners are almost twice your losers. That's what lets a 45% win rate make money.
Don't confuse it with the risk/reward ratio you plan before a trade, like a 10-point stop and a 20-point target. The planned ratio is a hope. Average win ÷ average loss is what actually happened.
Profit factor
Profit factor = total won ÷ total lost. Here, $1,350 ÷ $880 = 1.53. Above 1 means you made money; below 1 means you lost. It combines win rate and the win/loss ratio into one number. See what's a good win rate and profit factor?
Expectancy
Expectancy is what you make on an average trade:
Expectancy = (win rate × average win) − (loss rate × average loss)
Here: 0.45 × $150 − 0.55 × $80 = $67.50 − $44 = $23.50 per trade before fees, or about $20.50 after the $60 in fees ($410 ÷ 20). If it's positive over a large number of trades, you have an edge. More in how traders make money: edge and expectancy.
R-multiples
R is the amount you planned to risk on a trade: the distance to your stop, in dollars. Results are then measured in R. If you risked $100 and made $250, that's +2.5R; a full stop-out is −1R.
R makes trades comparable even when your size changes, and it shows discipline: losses much bigger than −1R mean you moved or ignored your stop. To use it, write your planned risk in the trade's notes before you enter.
Drawdown
In performance stats, drawdown is the drop from your account's highest point to its lowest point after it. If your balance went from $52,000 down to $50,700 before recovering, your drawdown was $1,300. Don't mix it up with a prop firm's drawdown rule, which is a limit; this is a measurement. Your biggest drawdown tells you what a bad stretch really looks like for your trading.
MAE and MFE
- MAE (maximum adverse excursion): how far a trade went against you before you closed it.
- MFE (maximum favorable excursion): how far it went in your favor.
If your winners usually dip 15 points before working and your stop is 10 points, your stop may be too tight. If your trades often run 30 points in your favor but you exit at 10, you may be cutting winners short. You can read both from your chart when you review a trade.
Sample size
Ten trades prove nothing. A setup with 3 wins out of 3 hasn't shown an edge; it's had a good week. Wait for at least 30 to 50 trades of a setup before trusting its numbers, and more before changing everything because of them.
Where to find them
Market Matrix's Dashboard shows your net P&L after fees, win rate, profit factor, average win and average loss for any date range, account or set of accounts. Insights breaks them down by setup, mistake and time of day, so you can work out expectancy for the things you actually do.
This article is for education only and isn't financial advice. The example numbers are made up to show the math. Trading futures involves substantial risk of loss.