The Five Numbers That Tell You If You're Actually Making Money

Most traders can tell you how much they made last month. Very few can tell you why. The bottom line is the least useful number in your journal, because it hides the decisions behind it: how often you win, how big those wins are next to your losses, and whether any of it survives a bad week.

Win rate is the first number, and the most misunderstood. Winning 60% of your trades sounds like a good month, until you look closer and find that those six winners averaged $80 while the four losers averaged $300. On its own, win rate tells you nothing about whether you made money. It only means something sitting next to the size of your wins and your losses.

That is what profit factor measures: every dollar you won divided by every dollar you lost. Below 1.0 and your losers are paying for your winners, no matter how good the win rate looks. Somewhere around 1.5 to 2.0 is a healthy, repeatable edge for most active traders. Far above that usually means a small sample, one big outlier, or a strategy that has not been tested through a rough stretch yet.

Next, put your average win against your average loss. Traders who win 40% of the time can be very profitable if their winners are twice the size of their losers. Traders who win 70% of the time can still lose money by cutting winners early and letting losers run. One number captures all of it: your average trade. If the average trade across a hundred trades is positive, you have something worth repeating. If it is negative, more screen time will not fix it until the process changes.

Then there is the number nobody wants to look at: your largest drop from a peak in equity down to the low that followed. This is the number that decides whether you can actually stick with the plan. A strategy that makes money but falls 40% on the way is one most people abandon at the bottom. A smaller, steadier curve is easier to trade through, and the curve you can sit through is the one that compounds.

The last step is where the real change happens: pulling those numbers apart. The same trades look very different once you split them by setup type, by day of the week and by time of day. It is common to find that one setup carried the whole month while another quietly bled, or that your morning trades work and your afternoon trades do not. You cannot fix what you have never separated.

None of this needs a spreadsheet. Every one of those numbers lives in the Trade Journal: P&L, win rate, profit factor, drawdown, an equity curve, and the breakdowns by setup, day and time. The point of tracking them is not to feel good or bad about last month. It is to know exactly which decisions are paying you and which ones are costing you, so you can do more of the first and less of the second.