Payoff ratio
The average winning trade divided by the average losing trade.
Formula
Payoff = |Average win| ÷ |Average loss|
How to read it
With the win rate it decides everything: a payoff of 2 needs only a win rate above one in three to make money.
How to use it
Tells whether winners are big enough to carry the losers.
Also called: payoff ratio, payoff.