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R-multiple

Money makes trades incomparable — a $400 win on a $50,000 account is a different event from the same win on $5,000. R fixes that, provided the risk it measures against was real.

2 min read

The formula

R = result ÷ amount risked on that trade

Risk one unit and make three, and the trade is +3R. Lose the full planned risk and it is −1R. The unit is your own risk, so the number means the same thing on any account size.

Why it is worth the trouble

Money figures cannot be compared across time. As an account grows, position sizes grow with it, and a run of $200 winners from last year is not comparable to $200 winners today. R removes the account size from the measurement entirely.

It also makes expectancy portable: "+0.25R per trade" is a statement another trader can understand without knowing your balance, and one you can still read after doubling your size.

The edge case: risk that was never real

R has a denominator, and the denominator is a plan. Three situations make it dishonest:

No stop was set. There is no planned risk, so there is no R. Assigning one after the fact — using the loss that happened, say — makes every trade exactly −1R by construction, and the measure becomes meaningless.

The stop was moved. If you widened it mid-trade, the risk you actually took is not the risk you planned. Worse, your statement records only the final stop, so the R computed from the file looks correct while describing a plan you abandoned. This is not a limitation of R but of exported data — see what your statement hides.

The stop was never reachable. A stop placed beyond a gap or in illiquid hours is a number in a field, not a level the market respects. Trades exceeding their stop are counted by the intent vs execution analyzer for this reason.

Reading a distribution of R

The useful view is not the average but the shape:

  • Winners clustered near +1R with losses at −1R suggests exits are mechanical, and the question is whether the entry edge is enough.
  • A few large positive R values carrying everything is a trend-following signature — normal for that style, fatal if you also cut winners early.
  • Losses beyond −1R appearing regularly means risk control is failing, and no amount of entry work fixes it.

That last case is worth acting on before anything else. A method with a positive edge and an unreliable −1R does not have a strategy problem.

More in Trading terms, defined by how they are computed

  • Net P&LThe result of a trade after commission and swap, and why the sign convention in broker exports makes double-counting so easy.
  • Profit factorGross profit divided by gross loss, the edge case that breaks it, and why a high profit factor on few trades means almost nothing.
  • ExpectancyThe expected value of one trade, the break-even win rate it implies, and why the figure needs an error bar to mean anything.
  • Win rateWhat share of trades finished positive, how break-even trades are counted, and why the figure is uninterpretable without the win-to-loss ratio.
  • Maximum drawdownThe largest peak-to-trough fall in your account, and the measurement choice that decides whether a prop account survives.
  • Trailing drawdownA loss limit that rises with your account and usually never falls back, plus the two sentences in a rulebook that decide when it can end your account.
  • Consistency ruleA cap on how much of your profit may come from a single day or trade, why it exists, and how it turns a winning account into an unpayable one.