What is an R-multiple?
An R-multiple expresses a trade’s result in units of its initial risk (R) — the amount that would have been lost at the stop. A trade that made twice its risk is +2R; one that hit the stop is −1R. Measuring in R makes trades of different sizes and instruments comparable.
Key points
- 1R = the money at risk between entry and stop.
- R-multiple = result ÷ initial risk.
- The average R per trade (expectancy) shows whether a method makes money.
Formula
R-multiple = profit or loss ÷ initial risk, where initial risk = |entry − stop| × size × value of one point.
Why traders use R
- Results become comparable across instruments, sizes and accounts.
- Expectancy is simply the average R per trade.
- The cost of discipline becomes a number: off-plan trades averaging −0.4R are a concrete thing to remove.
Where it comes from
Expressing results as multiples of the initial risk was popularised by Van K. Tharp in “Trade Your Way to Financial Freedom”.
Example
Risk is $100 per trade. A +$250 trade is +2.5R, a −$100 stop is −1R, and a −$140 loss after a slipped stop is −1.4R. Ten trades totalling +3R have an expectancy of +0.3R per trade.
Numbers are illustrative.
Questions
Can a loss be bigger than −1R?
Yes — through slippage, gaps or a moved stop. Losses beyond −1R are worth tracking: they are usually execution or discipline problems, not strategy problems.
Is R the same as risk/reward?
No. Risk/reward is planned before the trade (target distance ÷ stop distance); the R-multiple is the actual result after it.
Sources
- Tharp V.K. Trade Your Way to Financial Freedom. McGraw-Hill, 1998.