What is the profit-loss ratio?
For example, if you invest 1 million yuan and trade 10 times according to a certain operating system, where you make a profit 4 times, with profits of 150,000 yuan, 250,000 yuan, 350,000 yuan, and 450,000 yuan respectively; and incur losses 6 times, with losses of 100,000 yuan, 150,000 yuan, 100,000 yuan, 50,000 yuan, 70,000 yuan, and 200,000 yuan respectively.
At this point, the average profit during profitable trades is 300,000 yuan, and the average loss during losing trades is 111,700 yuan, resulting in a profit-loss ratio of 30/11.17 ≈ 2.69.
If you use this trading system for continuous trading, whether it’s 100 times or 1000 times, with a profit-loss ratio of 2.69, you can theoretically achieve profitability. A profit-loss ratio below 1 indicates a loss.
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