Payoff ratio (average win / average loss)
The payoff ratio is the average winning trade divided by the absolute value of the average losing trade. Also called the win/loss ratio, it describes the realized size of winners relative to losers and, combined with the win rate, determines whether a set of trades made or lost money.
Senzoukria · Glossary · Updated September 2026
At a glance
- Formula
- Average win ÷ |average loss|
- Link to profit factor
- Profit factor = payoff × W ÷ (1 − W), W = win rate
- Also called
- Win/loss ratio, realized reward-to-risk
- In Senzoukria
- Payoff (win/loss) in the Replay report; Win/loss ratio in the Performance panel
Definition
Split the closed trades into winners and losers, average each group, and divide the average win by the absolute average loss. Trades that closed at exactly zero belong to neither group. The ratio is realized, measured after the fact, whereas the reward-to-risk ratio of a single trade is planned at entry from the distances to target and stop.
A payoff ratio has no meaning without the win rate. A ratio of 3 with a 20% win rate loses money; a ratio of 0.8 with a 65% win rate makes money. The two numbers together are the ingredients of expectancy.
A worked example
A record has 100 trades: 40 winners totalling +12,000 and 60 losers totalling −9,000, net of costs. The average win is 300 and the average loss is −150, so the payoff ratio is 2.0. Expectancy is 0.40 × 300 − 0.60 × 150 = +30 per trade, and the profit factor is 12,000 ÷ 9,000 ≈ 1.33, which matches payoff × W ÷ (1 − W) = 2 × 0.40 ÷ 0.60.
The same record also shows why low win-rate systems feel hard to trade: with 60% losers, runs of six or more losses in a hundred trades are the norm rather than the exception.
In Senzoukria
The session report that opens when you press End in Replay lists Payoff (win/loss) in its ratio grid, next to Average win, Average loss and Win rate; the Performance panel shows the same figure as Win/loss ratio, with the hint average win relative to average loss. When a sample has no losing trade or no winning trade, the ratio cannot be computed and is shown as n/a or a dash rather than as zero. The Kelly figure of the same panel is derived from it, as W − (1 − W) ÷ payoff.
Common mistakes
- Comparing a gross payoff before fees with a net one: costs shrink winners and enlarge losers.
- Letting one outlier define the average win; a median win beside the mean shows whether that happened.
- Raising the payoff by moving targets further away without checking how the win rate falls in response.
- Reading a planned 3:1 reward-to-risk as a realized payoff; exits before target and slippage change it.
Related
In the same section
- Risk-reward ratio
- Payout
- Pass rate
- Penny jumping
- Partial fill
- Permutation test
- Parameter sweep
- Perpetual futures
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Frequently asked questions
- What payoff ratio do I need to be profitable?
- It depends on the win rate. Before costs, a strategy breaks even when the win rate equals 1 ÷ (1 + payoff): 50% for a payoff of 1, 33.3% for 2, 25% for 3. Costs raise those thresholds, especially for short-term trades with small averages.
- Is the payoff ratio the same as the profit factor?
- No. The payoff compares averages; the profit factor compares totals. They are linked through the win rate: profit factor equals payoff times W divided by (1 − W). A high payoff can coexist with a profit factor below 1 when winners are rare.