You read a trade recap online. "Took the long, closed it at 3R." Someone in the comments says their week was "minus 4R". Nobody explains what R is, because everyone assumes you already know.
It is simpler than it sounds. R is a ruler. It measures every trade with the same ruler: the amount you were ready to lose on it.
What does R mean, in plain words?
Before you enter a trade, you decide where you will get out if you are wrong. That exit is your stop, short for stop loss. The money you lose if price hits your stop is your risk on that trade.
That risk is one R. Everything else is measured against it.
Say you risk ten euros on a trade. Price goes your way and you close it with twenty euros profit. You made twice what you risked, so the trade was two R.
Say instead price goes against you and hits your stop. You lose the ten euros. You lost exactly what you risked, so the trade was minus one R.
That is the whole idea. R is your result divided by your risk, said in words: how many times your risk did you win or lose?
How do you work out R on a trade?
You need two things: what you risked, and what you got.
What you risked is the distance from your entry to your stop, times your position size. In practice many traders decide the money amount first ("I risk fifty euros on this trade") and pick a size that fits.
What you got is the result when you closed the trade.
Then you ask how many of the first fit into the second. Risk fifty euros, make seventy-five: that is one and a half times your risk, so one and a half R. Risk fifty, lose twenty-five because you got out early: that is half your risk, so minus half an R.
A trade where you closed at the exact entry price, with no gain and no loss, is zero R. Traders call that breakeven.
Why measure trades in R instead of money?
Money makes trades hard to compare.
Imagine two trades. In January your account was small and you risked ten euros. In June it was bigger and you risked forty. Both trades hit their target at twice the risk. In money, the June trade looks four times better. In R, both are two R. They were equally good trades. The only difference was size.
R strips the size away and leaves the quality of the trade. That is why a forex trader and a crypto trader can compare notes in R. Their accounts and markets look nothing alike, and R still lines them up.
It also helps your head. "I lost four hundred euros today" stings. "I lost two R today, which is two normal losing trades" is easier to look at calmly, and easier to learn from.
Can you lose more than 1R?
Yes. Price can jump past your stop, for example on a news release or over a weekend. Then your order fills at a worse price than you planned. Then you lose more than you risked. That trade might be minus one and a third R.
You also lose more than 1R if you move your stop further away during the trade. That is worth knowing, because it is one of the most common ways a careful plan turns into a big loss. If you see losses much bigger than one R in your journal, look at what happened on those trades first.
What do your R numbers add up to?
Once every trade has an R, you can add them up. Take a week of five trades. You win two R, then lose one R twice. Then you win three R and lose one R once more. Add them up and that week made two R in total.
Your average result per trade, in R, is called expectancy. It tells you what one trade has been worth to you over many trades. What expectancy is explains that number in more detail, and why it says more than your win rate.
A small number of trades still fools you, in R just as in money. Five trades in R tell you very little about the next five. How many trades you need before you can trust a setup covers that part.
What do you need to log to see your R?
Three prices for every trade: your entry, your stop and your exit. With those three, R works itself out. Without the stop, R is unknown, because you never wrote down what you were risking.
That is why what to track in a trading journal puts entry, stop and target at the top of the list. If you only write down the profit in money, you can never go back and see your trades in R.
Other questions about R
What does 3R mean?
You made three times what you risked. Risk twenty euros, make sixty: that trade was three R.
Is a higher R always better?
Not on its own. A trade aiming for five times its risk might hit its target far less often than a trade aiming for one times. What counts is your average result over many trades, which is why traders look at expectancy next to R.
Who came up with R-multiples?
The idea was made popular by the trading coach Van K. Tharp, who wrote about measuring every trade as a multiple of its initial risk in his book Trade Your Way to Financial Freedom. Most trading journals now use the same idea.
Do I need R if I always risk the same amount?
It still helps. Your risk in money will change as your account grows or shrinks. R keeps your old trades and your new trades on the same scale.
Read next:
EdgeFlow works out R for you from the entry, stop and exit you log. A trade with an empty stop shows as unknown, not as zero. If you want to see your own trades in R, next to the things you checked before each one, that is what EdgeFlow is for. It does not tell you what the next trade will do.