RiskPicksWhat is an R-Multiple?
R-multiple expresses a trade's result in terms of the initial risk. If you risked $100 on a trade and made $300, that's a 3R trade. If you lost the full $100, it's -1R.
Why think in R
- Normalizes results: compare trades regardless of position size or stock price
- Expectancy: your average R per trade determines long-term profitability
- Goal setting: "I need 2R winners" is more useful than "I need $500 winners"
Calculating expectancy
Expectancy = (Win Rate × Avg Win R) - (Loss Rate × Avg Loss R)
A positive expectancy means you're profitable over time. Example: 40% win rate with average 2.5R wins and 1R losses = (0.4 × 2.5) - (0.6 × 1) = 0.4R per trade.
The concept of R-multiples comes from Van Tharp: one of the books recommended on our resources page.