Profit Factor - Technical Indicators Strategies in Python

Installations & Python Packages
1

Additional Reading on Trade Level Analytics (6/5) has two articles - 
  1. Average Profitability Per Trade (APPT)
  2. The Top 17 Trading Metrics
The formula for profit factor according to the second article is  - 
Profit Factor = (gross profits) / (gross loss)

The Trade Level Analytics notebook of Section 6/1
Seems to display "Profit Factor" as the formula for APPT 

According to the first article these are two different measures with the APPT having distinct advantages over Profit Factor

Can you please help clarify this?

Thanks.
 
2

Hello Shay,



You are right when you mention that the profit factor mentioned in the "The Top 17 Trading Metrics" article is different than the profit factor mentioned in the notebook. 



As you already know, we get a better idea of how much we are winning in comparison to the losing trade if we use the formula of APPT. This is why we have used the APPT formula which takes into account both win and loss per trade. 



We will add a note to clarify this point in the notebook.



Thanks.

3

Thank you for clarifying this issue.



Does this practice of using  APPT -

implies not to use the calculation (gross profits) / (gross loss) at all ?

4

Hey Shay,



Each ratio serves its purpose in assessing trading strategies. Using APPT doesn't mean we should ignore the gross profit/gross loss ratio altogether. 



In practice, using both measures can offer a more holistic view of trading strategies. APPT gives insight into the average profitability per trade, while the GP/GL offers a quick ratio to gauge the overall effectiveness of the strategy.



Hope this helps!



Thanks

Rushda