Stop Loss vs Take Profit Probability and EV

This stop loss and take profit calculator uses a Monte Carlo simulation to calculate the probability of hitting your Stop Loss or Take Profit levels across different time horizons (expressed in bars).
It provides data-driven insights to optimize your risk management and position sizing by showing Expected Value for each scenario.
As a quant, I love using statistical data to help my decisions and get better EV from my trades.

🔬 How It's Calculated

• Monte Carlo Simulation: Runs 1,000-10,000 price simulations using a random walk model
  
• Volatility Analysis: Combines ATR-based and Historical Volatility for accurate price movement modeling
  
• Expected Value: Calculates profit/loss expectation using formula: (TP_Probability × Reward) - (SL_Probability × Risk)
  
• Time Horizons: Tests multiple timeframes (1, 5, 10, 20, 50 bars) to find optimal holding periods
  
• Risk/Reward Ratios: Automatically calculates and displays R:R ratios for quick assessment
  

💡 Use Cases

• Position Sizing - Determine optimal risk per trade based on Expected Value
  
• Time Horizon Optimization - Find the best holding period for your strategy
  
• Stop Loss Placement - Validate SL levels using probability analysis
  
• Take Profit Optimization - Set TP levels with statistical backing
  
• Strategy Backtesting - Compare different R:R setups before entering trades
  
• Risk Management - Avoid trades with negative Expected Value
  
• Swing vs Day Trading - Choose timeframes with highest success probability
  

🎯 How to Use

• Setup Trade: Enter your entry price, stop loss, and take profit levels
  
• You can add or remove time horizons denominated in bars. Say you are looking at 1h candles, adding a 24-bar time horizon means you are looking into 24 hours
  
• Choose Direction: Select Long or Short position
  
• Review Table
  
• Analyze Expected Value: Focus on positive EV scenarios (green background)
  
• Optimize Timing: Select time horizons with best risk/reward profile
  
• Adjust Parameters: Modify volatility calculation method and simulation count if needed
  

Examples
Here's how you can read the tables.

Example 1:

In this chart, we are analyzing the TP and SL probabilities as well as the EV (expected value) for a stock. I want to check what the likelihood is that my SL and TP get triggered over the next 5 days. The stock market is open for 6.5 hours per day, which is 13 bars in this 30-minute bar chart. 26 bars is 2 days, 39 bars is 3 days and so on.
Although this trade is more likely to trigger my SL than my TP, in some of the time horizons we have a positive expected value because of the risk/reward of our trade (i.e. distance of the SL and TP from the price) and the probability of hitting SL and TP.

Example 2:

In this example, we have applied the indicator to gold. Because the TP is much closer to the price, the probability of hitting the TP is much higher.
We can also observe that the expected Value in the shorter time frames is better than in the longer ones. This can give us some clues to set up our trade. If we know that the EV is positive, we can allocate more to that specific trade.

Enjoy, and please let me know your feedback! 😊🥂