R-Multiple Explained: How to Measure Trades by Risk

Two trades can close with exactly the same profit and still be completely different decisions. In one, you took your normal risk and the trade did what you planned. In the other, you doubled your usual size, your stop was far away, and the good result came in spite of the plan, not because of it. Measured in dollars, they look identical.

R fixes that. It measures every trade relative to the risk you took on it.

What R means

R is your planned risk on a trade: how much you lose if price hits the stop you set before entering. It's the unit of measurement, and every result is expressed as a multiple of it, hence the name R-multiple.

• A trade stopped out at the planned stop: −1R.
• A trade that made twice what you risked: +2R.
• A trade closed near your entry price: about 0R.

The unit is the same on every trade, regardless of position size, account size or share price. That's why you can compare a trade from last year with one from this week, even if your size has changed.

How to calculate R

For a long trade:

1. Risk per share = entry price minus your original stop.
2. Result per share = exit price minus entry price.
3. Result in R = result per share divided by risk per share.

For a short trade, flip it: risk per share is the stop minus the entry, and the result per share is the entry minus the exit.

The same idea sets your position size: position size = the amount you decided to risk on the trade, divided by risk per share. If you keep that risk amount fixed, 1R means the same thing on every trade, and comparisons become direct.

Use the original stop

If you moved your stop during the trade, calculate R against the original stop, the one you set before entering.

The reason is simple. R is supposed to answer "how did this go compared with what I planned?" Say you planned to risk 1R and then widened your stop mid-trade. The trade closed at a loss of 1.8R measured from the original stop. If you calculate R from the new stop instead, it looks like just another 1R loss, and the break from your plan disappears from your numbers.

What about moving your stop in your favor?

Moving the stop toward the trade, for example to breakeven or under the most recent swing low (a trailing stop), is trade management, not a mistake, as long as it's part of the plan. R is still calculated from the original stop: a trade stopped out at a stop moved to breakeven is about 0R, not −1R.

Planned risk/reward vs. realized R

Before you enter, the distance to your target compared with the distance to your stop is your planned risk/reward. A target twice as far away as your stop is a 1:2 risk/reward, or a planned gain of 2R.

After the exit, compare the plan with what happened:

• Realized R is much lower than planned, again and again: you may be exiting early, or your targets may not fit the setup.
• Losses bigger than 1R: you widened the stop, didn't get out when price reached it, or price gapped through it. Keep these three apart in your journal, because only the first two are your decisions. A position larger than planned doesn't change R when you calculate per share, but it makes the actual loss bigger, so log that too.
• Realized R close to the plan: your execution matches your plan, which is exactly what you want to measure.

Average R, also called expectancy

Win rate alone doesn't tell you much. You can win most of your trades and still lose overall if your winners are small and your losers are big. And you can win a minority of your trades and still come out ahead if your winners are larger than your losers.

Average R per trade, often called expectancy when it's measured in R, combines both sides: add up the R of all your trades and divide by the number of trades.

A worked example

Ten made-up trades, for the math only:

Four of the ten trades won, for a total of +7R. Six lost, for a total of −6.1R. The net result is +0.9R, an average of 0.09R per trade.

Now look at trade 9: a loss of 1.6R, more than the planned risk. Had it closed at the original stop for −1R, the average would have been 0.15R per trade. That's exactly the kind of finding R brings out and dollar totals blur. Ten trades is far too small a sample to say anything about a strategy, but it's enough to see how the math works.

Your R distribution: what to look for

Once you have a few dozen trades, look at all your R results together, for example as a histogram:

• Losses beyond 1R. The first check on your stop discipline.
• Winners bunched just above 0R. A possible sign of early exits.
• A few big trades producing most of the gains. Worth knowing, because cutting one of them short changes the whole picture.

If you keep your journal in a spreadsheet, you can build this chart once and keep it updated. If you're choosing an app, check that it shows one. More questions to ask are in how to choose a trading journal app.

When R is a poor fit

• Trades with no defined stop. No planned risk means no R. That in itself is worth logging.
• Scaling out. Calculate R for each piece by its size and add up the weighted result. There's an example in the FAQ below.
• Comparing very different setups. A low-win-rate setup with distant targets and a high-win-rate setup with close targets can reach the same average R in very different ways. Compare each setup with itself over time first.

R in SwingLog

In SwingLog, any trade with a stop is also shown in R: on the Trades screen, in the trade review (realized R), and on the Performance screen, which also shows your average R and R distribution. R is calculated from the original stop when it's recorded. When no usable original stop is recorded, as on older trades, the last recorded stop is used. When a stop moves, the original stays visible in the trade's journal, struck through next to the current one, along with how many times it moved, where the moves were recorded.

You can start a 14-day free trial, no credit card required.

Frequently asked questions

What's a good average R?

There's no single number that fits everyone. Average R depends on the setup, the win rate and how many trades it's based on. What's worth tracking is your own trend over time, and the gap between your on-plan and off-plan trades. How to find those off-plan trades is covered in how to stop repeating the same trading mistakes.

What if a trade had no stop?

Then it has no R, because no risk was defined. Log it separately and count how many trades like that you have. If you reconstruct a stop after the fact, mark it as reconstructed, since it's less reliable than one set in advance. More on what to write before you enter is in what to write in a trading journal.

How do I calculate R when I scale out?

Calculate R for each part against the original risk, and weight it by size. For example, if you closed half the position at +2R and the other half was stopped out at a stop moved to breakeven, the total is +1R.

Is R the same as the risk/reward ratio?

Not quite. Risk/reward is a plan made before the entry: how much you expect to make relative to what you're risking. Realized R is what actually happened. Comparing the two shows whether your execution matched your plan.