Dollars and percentages change with account size. R does not. An R-multiple expresses a trade result as a multiple of the risk you took, so a +1.5R trade means the same thing on a $1,000 account and a $100,000 account.
How R Works
Your risk on a trade is the distance between entry and stop, multiplied by your position size. That amount is 1R. A winner is measured against it.
| Risk (1R) | Result | R-multiple |
|---|---|---|
| $50 | Stopped out for -$50 | -1R |
| $50 | Closed for +$75 | +1.5R |
| $50 | Closed for +$375 | +7.5R |
Why Traders Use R
- →It makes trades comparable regardless of position size.
- →It forces you to define risk before you enter.
- →A series of trades can be added up in R to see the real result.
- →It separates the quality of the plan from the amount you happened to risk.
Expectancy: What R Adds Up To
Expectancy is the average R you make per trade. The formula is: (win rate x average win in R) minus (loss rate x average loss in R).
| Win rate | Average win | Average loss | Expectancy per trade |
|---|---|---|---|
| 60% | +1.5R | -1R | (0.6 x 1.5) - (0.4 x 1) = +0.5R |
| 40% | +2R | -1R | (0.4 x 2) - (0.6 x 1) = +0.2R |
| 50% | +1R | -1R | (0.5 x 1) - (0.5 x 1) = 0R |
Same win rate, different outcome
A 50% win rate with +1R wins and -1R losses breaks even. Win rate alone tells you almost nothing. You need the R of the wins and the losses.
R in Trading Signals
Good signals quote their targets in R. A first target at +1.5R and a second at +7.5R tell you the payoff before you commit, and a stop at -1R tells you the cost of being wrong.
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Try The Secret Vault FreeHow do I calculate R?
Divide your profit or loss by the amount you risked on the trade (entry minus stop, times position size).
Is a higher R always better?
Higher R targets pay more when they are hit but are hit less often. Look at the R and the hit rate together.