How much money is 1R?

1R is the amount you accept losing if price reaches your initial stop loss. If you risk 1% of a 10,000 USD account on each trade, 1R is 100 USD.

Does moving my stop to breakeven change R?

No. R is always measured from the entry price to the initial stop loss, so moving the stop later does not change the unit you measure with.

Does an R-multiple tell me whether my system works?

One trade does not. The average R over many trades, called expectancy, says how many units of risk each trade returns on average, and it only starts to mean something once the sample is large.

Can I use R-multiples without a stop loss?

Not really. R is defined by the distance to a stop decided before entry. Without that stop there is no fixed risk to divide by, and the results of different trades cannot be compared.

R-Multiple in Trading: Measure Results by Risk

Two traders each close a trade 200 USD in profit. The first would have lost 100 USD had the trade failed. The second would have lost 1,000 USD. The profit is identical, yet these were very different trades: one returned twice its risk, the other a fifth of it. Measuring in money hides that difference. The R-multiple is the measure that shows it.

What R means

R is the initial risk of a trade: the amount you lose if price travels from your entry to the stop loss you set when you opened the position.

An R-multiple is the trade’s result divided by R. A profit of twice the risk is +2R. A trade that hits its stop exactly as planned is −1R. A trade closed early for a small loss might be −0.4R.

The general notion of comparing reward with risk is described on Investopedia. The R-multiple applies that idea after the fact: it records what a trade actually returned for each unit risked, not what you hoped it would.

How to calculate it

The numbers below are made up to show the arithmetic. Take a long trade:

Entry price: 100
Initial stop loss: 95
Risk per unit: 100 − 95 = 5

If you close at 110, the profit per unit is 10, and 10 ÷ 5 = +2R. If you close at 97, the loss per unit is 3, which is −0.6R. If the stop is hit at 95, the result is −1R.

Position size does not change this calculation. Whether you held one unit or a thousand, the trade is still +2R. That is why R lets you compare trades of different sizes, on different markets, taken months apart.

Why keep a journal in R and not in money

A profit or loss in money depends on position size, and size changes as the account changes. R does not. When you record results in R, three things become visible that money figures hide:

Whether winners are large enough compared with losers. Winning 60% of trades sounds fine, but if each winner is +0.5R and each loser is −1R, the total goes down over time.
Whether you respect your stop. A trade recorded as −2.3R means the loss ran well past the level you had decided on.
The expectancy of your way of trading. Add up the R of every trade and divide by the number of trades. A positive figure after ten trades says very little; it starts to carry weight after several dozen.

A common mistake: measuring R from a moved stop

An easy mistake is to move the stop to breakeven and then recalculate R from the new stop. A large winner then turns into “0R risk” and a meaningless multiple. R must always be measured from the initial stop, because that was the risk you actually accepted at the moment you decided to enter.

The same applies in the other direction. If you widen the stop after entry and it is hit, the trade is not −1R. It is whatever the loss was, divided by the original risk. The journal should show that number, uncomfortable as it is.

Expectancy: reading a run of trades

A single trade says almost nothing about how you trade. The run of trades is what is worth reading. The table below is an invented example to illustrate the calculation, not the result of any method or account.

Trade	Result
1	+2R
2	−1R
3	−1R
4	+1.5R
5	−1R
6	+3R
7	−0.5R
8	−1R
9	+2R
10	−1R

Added together, these ten trades come to +3R. Divided by ten, the average is +0.3R per trade. That average is the expectancy.

Look closer and the run has four winners and six losers, a win rate of 40%. The four winners total 8.5R, about +2.13R each. The six losers total 5.5R, about −0.92R each. Put those three figures together and you get the expectancy back: 40% of 2.13R minus 60% of 0.92R is roughly +0.3R.

This shows that win rate alone means nothing. Here there are more losers than winners and the total is still positive, because the winners are bigger than the losers. The reverse also happens: seven winners in ten trades at +0.3R each, against three losers at −1R each, gives a negative total. To understand a run of trades you need all three figures: win rate, average winner and average loser.

It also needs saying that ten trades prove nothing. If trade 6 in the table had been −1R instead of +3R, the total would have gone from +3R to −1R. A short run is dominated by one or two lucky or unlucky trades. So do not draw conclusions about your trading from ten or twenty trades. Keep recording, and start trusting the average only when a single trade can no longer flip its sign.

R and position size

R only works when every trade has a risk decided in advance. The usual way is to fix the risk per trade as a small part of the account, and let the distance to the stop decide the size. The numbers here are again an example.

Take a 10,000 USD account and a risk of 1% per trade. Then 1R is 100 USD.

Entry 100, stop loss 95. Risk per unit is 5. Size is 100 ÷ 5 = 20 units, a position worth 2,000 USD.
Entry 100 again, but the stop further away at 90. Risk per unit is 10. Size is 100 ÷ 10 = 10 units, a position worth 1,000 USD.

In both cases, if the stop is hit you lose 100 USD, exactly −1R. A wider stop does not make the risk bigger. It makes the position smaller.

This changes how to think about stops. A stop goes where the idea behind the trade is proven wrong, not where it lets you take the size you wanted. Size is the output of a division, not something chosen first. If the division gives a size so small that the trade feels pointless, that is information about the trade, not a reason to pull the stop closer.

In Nendojo you set the risk per trade in the settings. When you click the chart to choose a stop loss, the app works out the size with the same division, so every trade in a replay session has the same 1R and can be compared with the others.

A replay drill

The concept takes a minute to read and many repetitions to use without thinking. Open the replay at the end of this article and do exactly these things:

Step through the candles one at a time with the right arrow key. Do not use autoplay.
Before each entry, decide the stop loss and say out loud what 1R is for this trade.
Enter with the stop: press B to buy or S to sell, then click the chart where the stop goes.
When the trade closes, work out its R-multiple yourself before looking at the figure the app shows.
If you moved the stop during the trade, write down why, and check that you still measured from the initial stop.
After ten trades, add up the R and divide by ten. Then count the winners, and work out the average winner and the average loser.

Nendojo records the R of each trade from its initial stop, along with the best profit and deepest loss while the trade was open, so you can compare your own arithmetic with it. Press F to open the statistics.

The drill is not about ending with a positive total. Ten trades cannot tell you that. It is about making three habits automatic: a stop before every entry, a size that follows from it, and a journal written in R.