What is a good profit factor?

A profit factor above 1.0 means the system is net profitable. Values between 1.3 and 1.6 are considered solid and sustainable for real EA accounts. Values above 2.0 are rarely genuine and often point to too few trades, curve-fitting, or martingale effects.

What does maximum drawdown mean?

Maximum drawdown is the largest percentage decline from a peak to the following trough. It describes the deepest losing valley an account has gone through – the single most important metric for real, felt risk.

What is the difference between the Sharpe and Sortino ratios?

Both measure return per unit of risk. The Sharpe ratio penalizes all volatility – including upside. The Sortino ratio penalizes only downside deviation and is therefore fairer to strategies with occasional large gains. For trading systems, Sortino is usually more meaningful.

Which metric is the most important?

There is no single magic number. Profit factor shows profitability, maximum drawdown shows risk, and Sharpe/Sortino show the ratio between them. Only together – and over a sufficient number of trades – do they give a reliable picture.

Trading metrics explained: drawdown, profit factor, Sharpe & Sortino

The four metrics at a glance

Four metrics decide whether an EA track record is good or dangerous: the profit factor measures profitability (gross profit divided by gross loss), maximum drawdown measures risk (largest decline from a peak), and the Sharpe and Sortino ratios measure the relationship between return and volatility. No single number stands alone: a high profit factor with a brutal drawdown is worthless, and a beautiful equity curve over just 30 trades is statistically meaningless. Read these four values together and you can reliably tell credible systems from dangerous ones.

Profit factor

The profit factor (PF) is the simplest profitability metric:

Profit factor = gross profit ÷ gross loss

PF = 1.0 → profits and losses cancel out exactly (before costs).
PF > 1.0 → the system is net profitable.
PF between 1.3 and 1.6 → a solid, sustainable range for real EA accounts.
PF > 2.0 → treat with caution: usually too few trades, curve-fitting, or martingale effects.

Note: the profit factor says nothing about risk. A grid EA can show a PF of 3.0 for months – until a single day wipes the account out.

Maximum drawdown

Maximum drawdown (Max DD) is the largest percentage decline from a peak to the following trough:

Max DD = (peak − trough) ÷ peak × 100

It answers the decisive question: how bad did it get at the worst moment? Rules of thumb:

< 15% → conservative, easy to sleep through.
15–30% → typical for more active EA strategies.
> 40% → aggressive; only bearable if you truly understand the strategy.

An important distinction is relative drawdown (as a percentage of equity) vs. absolute drawdown (in account currency). When comparing different accounts, the relative, percentage drawdown is almost always what matters.

Sharpe ratio

The Sharpe ratio relates excess return to the total volatility of returns:

Sharpe = (return − risk-free rate) ÷ standard deviation of returns

It answers: how much return do I get per unit of risk? Rough guide: < 1 mediocre, 1–2 good, > 2 very good. The catch: the Sharpe ratio penalizes all volatility – including positive upside spikes. A system with occasional large gains is unfairly marked down.

Sortino ratio

The Sortino ratio fixes exactly that weakness. It uses only downside deviation in the denominator – that is, only the unwanted downside volatility:

Sortino = (return − target return) ÷ downside deviation

Upside swings are not penalized. For trading strategies the Sortino ratio is therefore usually more meaningful: it measures risk the way a trader actually feels it – losses hurt, large gains do not.

Worked example: how the numbers look live

Theory is good; a real account is better. Our public Live Multi-EA Showcase shows a read-only connected account running multiple EAs. Here is how to read its metrics concretely:

Profit factor 1.53 → solidly in the sustainable range (1.3–1.6). For every €1 of loss there are €1.53 of profit.
Drawdown 22% → active but controlled. The account went through a 22% losing valley and recovered – realistic for a multi-EA setup.
Together, these values paint a picture that is neither too good to be true (no curve-fitting) nor too risky.

You can compute exactly these metrics for your own account with the free Portfolio Analysis – connected read-only via your investor password, without exposing any trading or withdrawal rights.

Common misinterpretations

Too few trades. Metrics from < 100 trades are statistical noise. Credible track records have at least 200 trades across multiple market phases.
Backtest instead of live. Glossy backtest numbers mean nothing without a verified live track record. More in the Backtesting & forward-testing guide.
Reading metrics in isolation. Profit factor without drawdown is only half the story.
Ignoring correlation. Three EAs with 20% drawdown each can bleed far more than 20% combined if they are correlated – see EA portfolio management.

Bottom line

Drawdown, profit factor, Sharpe and Sortino are not competitors but four angles on the same account: profitability, risk, and the ratio between them. Read together and over enough trades, they cut through marketing curves and reveal what is genuinely sustainable. Test your own numbers in the Portfolio Analysis.