Gross profits divided by gross losses over a set of trades; above 1.0 is profitable, and 1.5 to 2.0 is considered solid.
Expectancy: the average trade. Forty trades sorted by outcome: 24 small losses and 16 larger wins. Weighting each side by how often it happens gives the average result per trade, marked here by the dashed line at +$120.
Profit factor is a simpler cousin of expectancy. It ignores trade count and tells you how many dollars you made for every dollar you lost.
Very high profit factors in backtesting (above 3) often indicate curve fitting or a tiny sample-size. Live results are usually lower than tested ones after slippage.
Example: over 100 trades you made $12,000 on winners and lost $7,500 on losers. Profit factor = 12,000 / 7,500 = 1.6.