R-multiple

Set the unit before trading

R is initial planned cash risk, rather than used margin, notional exposure or a percentage of an existing profit. Record volume, assumed entry and exit, and the cost convention. If the budget includes fees, account for them consistently when assessing execution. R must be positive; a zero denominator makes the ratio undefined. The plan itself does not guarantee that losses remain within that amount.

Compare results consistently

Result in R = cash P&L / initial R. Closing half the original position at +2R and the other half at −1R produces +0.5R for the whole trade before additional costs. Both components must refer to the same full original position. Combining exits requires actual volumes and prices, rather than an unweighted average of labels attached to individual fills.

Do not rewrite the risk history

Moving a stop so that the remaining planned risk falls from USD 100 to USD 50 does not turn a USD 150 result into +3R in a journal based on initial risk: it remains +1.5R. Otherwise the record suggests an improvement that did not occur. Gaps, financing or worse fills can produce losses beyond −1R. Distinguish the planned risk:reward ratio from the realised R-multiple.

R and the account result

Two trades returning +1R and −1R can still change the balance. With initial risk of USD 100 on the first and USD 200 on the second, results are +USD 100 and −USD 200: a USD 100 loss despite zero summed R. Keep strategy assessment in R separate from, and reconciled with, cash account performance. Also record equity before each entry.

Use it in the journal

Compare the mean, dispersion and loss tail while retaining separate cash results and each trade’s R. Adding R units does not automatically give the account’s percentage return when risk varies over time. Group fills under a clearly defined trade. In the course: R:R and expectancy and journals and metrics.

Diagram and worked example