How do you calculate the Risk Reward Ratio of an EA?

How do you calculate the Risk Reward Ratio of an EA?

Most scalping robots that are profitable so far have high strike rate, and take little pips as profit. For Example

Trade was taken at 1.4743
Stop Loss set to 1.4775 - 32 pip stop loss
Take profit was set to 1.4725 - 18 pips from the sell price
Trade closed at 1.47390 - 4 pip profit

In manual trading the above is not a all a good trading strategy :slight_smile:

How do you factor in the strike rate of the robot?

Thanks

That’s a tricky issue.
Risk/reward ratio is used to calculate expected profit of a trade.(expected profit/ accepted loss),
In your example 18/32 ~=0.56 which is bad.
But to analyze performance of an account (EA or manual trade) opinions are divergent.
I’d say you have to consider overall performance, not a single trade.
Profit factor: amount win/amount loss - the higher the better. Over 1 mean account is in profit.
Win/Loss ratio: number of winning trades/number of losing trades the higher the better. Over 1 mean profit trades>losing trades.
Average profit/trade vs average loss/trade. Losses can be few(high win/loss ratio) but can outcome absolute profit, so is better to have avg. profit> avg.loss.
Max margin used - more margin used mean more lots - more money at risk.
Max drawdown versus total profit. If EA made let’s say 15% profit and have a max drawdown of 30% that’s bad, was in danger to lose 30% while it made 15% profit.

thanks…I agree with you.