The Profit/Loss Ratio is a metric used to evaluate the potential profitability of a trading strategy by comparing the average profit of winning trades to the average loss of losing trades. It is calculated by dividing the average profit of winning trades by the average loss of losing trades. A ratio greater than 1 indicates that the average profit exceeds the average loss, suggesting a potentially profitable strategy, while a ratio less than 1 implies the opposite. Effective traders often aim for a ratio of at least 1.5 or 2, alongside other factors like win rate and risk management, to enhance their overall trading performance.