Profit Factor, Recovery Factor & Sharpe Ratio in MT5 Explained

Profit, consistency, cost of losses and depth of drawdown are separate questions. A strategy can score well on one and poorly on another, so a single figure rarely describes its risk profile.

Net Profit is total gross profit minus total gross loss over the test. It says how much the strategy made, but very little about the risk it took to make it.

Profit Factor is gross profit divided by gross loss. A value above 1 means gross profit exceeded gross loss historically. There is no universal "good" value, and the figure depends heavily on sample size: a small number of trades can produce a high Profit Factor by chance.

In the MetaTrader 5 Strategy Tester, Recovery Factor relates Net Profit to maximum balance drawdown in monetary terms. It does not use equity drawdown, so a strategy with large floating losses can still show a strong Recovery Factor. See balance vs equity drawdown in MT5.

Sharpe Ratio relates returns to their variability. In the MetaTrader 5 Strategy Tester, the risk-free rate used in the Sharpe Ratio calculation is assumed to be zero. Higher values mean returns were smoother relative to their size, not that the strategy was safe. Calculation and interpretation can differ across platforms, so read it alongside drawdown and the other metrics rather than on its own.

Expected Payoff is the average historical result per trade. A positive value can still coexist with substantial drawdown, for example when many small gains are interrupted by occasional large losses.

A high win rate does not automatically mean a better strategy. What matters is how it combines with average win, average loss and how losses are distributed. A system that wins often but occasionally loses heavily can have a worse risk profile than one that wins less often with smaller losses.

Trade count is the sample size behind every other statistic. Metrics based on very few trades are less informative, because chance has a larger influence.

Balance drawdown measures peak-to-trough declines in account balance, which reflects realised results during a normal test.

Equity drawdown also includes floating P/L from open positions, so it can reveal risk a balance curve hides. The dedicated drawdown guide covers this in detail.

MT5 reports drawdown both in money and as a percentage. The percentage makes drawdown easier to compare on a scale-adjusted basis, provided the position-sizing model and other test conditions are also comparable; the money figure shows the actual amount at stake. Both provide useful context, and the largest of each can come from different points in the test.

Illustrative example only; not based on any real strategy or AXIFLARE product.

Strategy A has a high win rate but a deep equity drawdown, because it holds losing positions until they recover. Strategy B has a lower win rate and a much smaller drawdown, because it closes losing trades early. Judged by win rate alone, A looks better. Judged by drawdown alone, B showed a much smaller historical drawdown in this illustrative example. Which is preferable depends on your risk tolerance, and win rate alone cannot answer that.

• Start with balance and equity drawdown.
• Check the trade count.
• Read Profit Factor.
• Read Recovery Factor.
• Check Expected Payoff.
• Consider Sharpe Ratio.
• Look at the equity curve.
• Review the backtest methodology.

Metrics are descriptions of a past test, not predictions. Read them together, and read them in light of how the test was run: see how to backtest an EA in MT5 and how to evaluate an XAUUSD EA. Please also read our Risk Disclosure.

Reference: MetaTrader 5 tester report statistics.