Trader's Glossary

Profit and Loss (P&L)

Profit and loss is a method of monitoring a trading system’s ability to consistently create more profits than loses over a given period of time. Profit and loss is calculated by taking the average profit from winning trades and dividing it by the average loss from losing trades. The result is two numbers which form a profit and loss ratio. A common benchmark for a successful strategy is that it should generate a profit and loss ratio of at least 2:1, in other words two wins for every one loss.