Trading term

What is R-multiple?

An R-multiple expresses a trade's result as a multiple of the amount you risked on it, where 1R is the distance from entry to stop. A win of three times that risk is +3R, and a full stop-out is −1R.

R is simply your risk on a trade — the distance from entry to stop, multiplied by position size. Fix that as the unit and every outcome becomes comparable: a $600 profit on a $200 risk is +3R, and so is a $3,000 profit on a $1,000 risk. The dollar amounts differ; the quality of the trade is identical.

That normalisation is what makes a track record readable. Raw P&L in currency tells you as much about how big you were betting as about how well you traded, so a single oversized winner can hide a mediocre process. Recording results in R strips position size out and leaves only the decision.

It also makes the arithmetic of profitability tractable. Once every trade is a number of R, you can compute expectancy, profit factor and drawdown in units that apply regardless of account size — which is why nearly every serious trading journal records outcomes this way.

One trade, four outcomes, one unit
Entry $50 · Stop $48so 1R = $2.00 per shareEvery outcome below is the same trade,measured in that one unit.-1R0R+1R+2R+3RStopped outexit $48-1RCut earlyexit $49-0.5RSmall gainexit $51+0.5RTarget hitexit $56+3RSame shape on any account — R strips position size out of the record.

Entry $50 with a stop at $48 makes 1R = $2. Exiting at $56 is +3R; being stopped is −1R. The same shape works on any account size.

For example

You buy at $50 with a stop at $48, so 1R is $2 per share. Selling at $56 is a +3R trade. Being stopped out at $48 is −1R. Cutting early at $49 is −0.5R, and closing at $51 for a small gain is +0.5R.

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Why it matters to you

R-multiples make performance comparable across instruments, account sizes and time. They also reframe risk management as a design decision rather than a reaction: once you know a system produces, say, +0.2R per trade on average, you can size positions deliberately instead of guessing what feels affordable.

⚠ R is worthless if the stop moves

The whole framework rests on 1R being fixed at entry. Widening a stop because price went against you retroactively changes the denominator, so a −2R loss gets recorded as −1R and the record quietly flatters itself. If you move a stop, the honest thing is to record the loss against the original risk.

Frequently asked questions

What is an R-multiple in trading?

It's a trade's result expressed as a multiple of the amount risked. If your risk from entry to stop is 1R, a profit of twice that is +2R and a full stop-out is −1R, regardless of the currency amounts involved.

How do you calculate an R-multiple?

Divide the trade's profit or loss by the amount you originally risked. Risking $200 and making $600 gives +3R; risking $200 and losing $200 gives −1R. The risk figure must be the one set at entry.

Why use R instead of dollars?

Because dollars mix together how well you traded and how large you bet. R strips position size out, so a small account and a large one produce comparable records and a single oversized winner can't disguise a weak process.

What is a good average R-multiple?

Any positive average is profitable before costs, and consistently above +0.2R per trade is generally considered solid. What matters more than the number is that it's measured over enough trades to be meaningful and that the risk denominator was never adjusted after entry.

Related terms

BacktestingBacktesting runs a precisely defined set of trading rules over historical data to see how they would have performed on it. It is the cheapest way there is to reject a bad idea, and a poor way to prove a good one.Curve fittingCurve fitting, or over-optimisation, is tuning a strategy until it fits the historical data almost perfectly — including the random noise in it. The result looks superb in a backtest and fails immediately in live trading.Equity curveAn equity curve plots the running total of an account or a strategy over time, updated after every single trade it takes. Its shape — the slope, the smoothness, the depth of its dips — says more about a system than the final number does.ExpectancyExpectancy is the average amount you can expect to win or lose per trade, given your win rate and the relative size of your wins and losses. It is the single number that says whether a strategy makes money.
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