This study aimed to analyze the application of composite domain analysis algorithm for electroencephalogram (EEG) images of children with epilepsy and to investigate the risk factors related to poor prognosis. 70 children with neurological epilepsy admitted to the hospital were selected as the research objects. Besides, the EEG of the children during the intermittent and seizure phases of epilepsy were collected, so as to establish a composite domain analysis algorithm model. Then, the model was applied in EEG analysis. The clinical disease type and prognosis of children were statistically analyzed, and the risk factors that affected the prognosis of children were investigated. The results showed that the EEG signal values of the detail coefficients (d51 and d52) and the approximate coefficient (c5) during the epileptic seizure period were higher markedly than the signal values of the epileptic intermittent period; the EEG signal of the epileptic intermittent period was a transient waveform, which appeared as sharp waves or spikes. The EEG signal of epileptic seizures was continuous, with a composite waveform of sharp waves and spikes, and the change amplitude of the wavelet envelope spectrum during epileptic seizures was also higher hugely than that of intermittent epilepsy. The accurate identification rate, specificity, and sensitivity of EEG analysis with the composite domain algorithm were higher than those without the algorithm. Among the five types of epileptic seizures in children, the proportion of systemic tonic-clonic status was the largest, and the proportion of myoclonic status was equal to that of complex partial epileptic status, both of which were relatively small. The proportion of children with a better prognosis was 75.71% (53/70), which was higher than those with a poor prognosis 24.29% (17/70). Abnormal imaging examination (odds ratio (OR) = 3.823 and 95% confidence interval (CI) = 1.643–8.897); seizure duration greater than 1 hour (OR = 1.855 and 95% CI = 1.076–3.199); C-reactive protein (CRP) (OR = 5.089 and 95% CI = 1.507–17.187); and abnormal blood glucose (OR = 3.077, 95%CI = 1.640–5.773) were all independent risk factors for poor prognosis (all
P
<
0.05
). The composite domain analysis algorithm was helpful for clinicians to find the difference in the EEG signals between the epileptic seizure period and the epileptic intermittent period in a short time, thereby improving the doctor’s analysis of the results, which could reflect its marked superiority. In addition, abnormal imaging examinations, convulsion duration greater than 1 hour, CRP, and abnormal blood glucose were independent risk factors for poor prognosis in children. Therefore, the invasion of related risk factors could be reduced clinically by prognostic review with medical advice, attention to food safety and hygiene, and improvement of children’s immunity.