Profit factor and expectancy tell different stories

[Amanhasnoname]

Profit factor, the ratio of gross profit to gross loss, is popular and easy to compute. Expectancy, the average profit per trade, is more directly useful. They can disagree, particularly for scalpers.

A system with a profit factor of 1.3 might have an expectancy of 0.1 pips per trade after costs, which is razor thin. Another with a profit factor of 1.2 and larger average trades might have an expectancy of 0.4 pips. The ratio hides the scale.

Expectancy per trade, expressed in pips and relative to costs, shows the margin of safety. If costs rise by 0.1 pip, a strategy with 0.1 expectancy dies, while one with 0.4 survives.

Profit factor is also sensitive to outliers. One large win can lift it, and removing that trade can collapse it.

Report both, along with the standard deviation, the number of trades, and the confidence interval. Looking at the median trade provides further perspective.

A single headline number never captures the quality of a system.

Which metrics are in the standard report for evaluating a strategy?