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Expected Payoff Calculation

Excel Help for Expected Payoff Calculation in Charting and Performing Technical Analysis


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Expected Payoff Calculation

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OopsYou can use the same logic to determine the target hit rate for different scenarios. For example, the first scenario assumes that either you gain $10 or lose $20.  Plugging this into the probability assumptions the expected payoff is:
=(-2*B4)+(10*(1-B4))
Where B4 is the cell calculating the probability of winning.  The expected payoff can then be used to calculate the expected profit margin by dividing it by the cost.

To model alternative scenarios such as the player (only paying $5 for a $12 win) we can simply adjust the target hit rate to obtain the desired hit rate such as 9 out of 10 - 90%, or which ever results in an acceptable expected payoff.
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