An R multiple sizes every trade against the risk you put on it. Risk $100, make $250, and that trade is +2.5R. Get stopped at your full stop and it's -1R, every single time, whatever the dollar amount was. R turns a messy column of dollar results into one clean scale, so a $50 trade and a $5000 trade can finally be compared on the only thing that matters... how much you put at risk to make them.
How do you work out an R multiple?
Divide the result of the trade by what you risked. Risk 200 and make 600, that's +3R. Lose the whole 200, that's -1R. Your starting risk is the distance from your entry to your stop, times your position size. Lock that in as your 1R and every result reads as a multiple of it. A clean stop out always lands at -1R.
Why R instead of dollars?
Because dollars hide your edge behind your position size. A trader who made 1,000 dollars risking 2,000 did worse than one who made 800 risking 400, and only R shows it at a glance. R also travels across accounts. The same strategy on a $5000 account and a $500000 account draws the same R curve. Dollars tell you how you did. R tells you how good the strategy is, which is why your Edge Score runs on the R scale.
The one thing you must never do.
Never annualise them. There's no square root of 252 scaling for R, and slapping it on turns a real +40R year into some fantasy number in the thousands. R multiples aren't percentage returns and don't compound like them, so report Total R or expectancy per trade, never a made up annual figure.
Frequently asked questions
References
Related terms
- Slippage — The gap between the price you expected and the price you actually got.
- Trading Costs — Broker-reported commissions and fees, plus components computed from an exact verified schedule.
- Live vs Backtest — The gap between how a strategy looked in testing and how it performs with real money.
- Forward Testing — Running a strategy on new market data in real time, before you risk real money on it.