R-multiples express every trade outcome as a multiple of the initial risk. One number that normalizes across instruments, position sizes, and strategies.
R-multiples express every trade outcome as a multiple of the initial risk. One number that normalizes across instruments, position sizes, and strategies.
R is one unit of your initial risk on a trade. It is the distance from your entry price to your initial Stop Loss (SL), measured in price.
Example: Buy AAPL at $185 with SL at $180. The distance is $5. That $5 is 1R for this trade.
If the trade makes $10, it made +2R. If it loses $5 (stopped out at SL), it lost -1R. The dollar amount changes with position size and instrument price, but the R-multiple stays the same regardless.
Consider two trades:
Both made $1,000. But Trade A risked $500 to make $1,000 (+2R), while Trade B risked $1,000 to make $1,000 (+1R). Trade A was twice as efficient per unit of risk taken.
R-multiples normalize this. They let you compare:
Without R-multiples, a strategy trading expensive instruments looks better in dollar terms even when it takes more risk to generate those dollars.
R-multiple = (Exit Price - Entry Price) / (Entry Price - Initial SL)The numerator is your actual profit per unit. The denominator is your initial risk per unit.
Example: Buy at $185, SL at $180, exit at $195.
R = ($195 - $185) / ($185 - $180) = $10 / $5 = +2.0RR-multiple = (Entry Price - Exit Price) / (Initial SL - Entry Price)For shorts, profit is entry minus exit (you want price to fall), and risk is SL minus entry (SL is above entry).
Example: Short at $200, SL at $210, exit at $185.
R = ($200 - $185) / ($210 - $200) = $15 / $10 = +1.5RR-multiple = Profit per Unit / Initial Risk per UnitThis works for both directions. Profit is positive when the trade moves in your favor, negative when it moves against you.
| R-multiple | Meaning |
|---|---|
| +3R or higher | Exceptional trade — captured 3x or more of initial risk as profit |
| +2R | Strong trade — doubled the risk as profit |
| +1R | Solid trade — made exactly what was risked |
| +0.5R | Marginal win — profit was half the risk taken |
| 0R | Breakeven — no gain, no loss (excluding fees) |
| -0.5R | Small loss — exited before SL, or SL tightened before hit |
| -1.0R | Full SL hit — lost exactly the initial risk |
| Worse than -1R | Slippage or gap through SL — lost more than planned risk |
A result worse than -1R signals that the exit price was beyond the initial SL. This happens with overnight gaps, fast-moving markets, or illiquid instruments where the MARKET exit order fills at a worse price.
The mean R-multiple across all closed trades. This single number tells you whether your system generates positive expectancy.
Average R = Sum of all R-multiples / Number of tradesAn Average R above zero means the system is profitable on a risk-adjusted basis. An Average R of +0.5R means that on average, each trade returns half of what it risks.
The average winning R divided by the average losing R. Measures how large your wins are relative to your losses, in risk terms.
Payoff Ratio = Average Winning R / |Average Losing R|A Payoff Ratio of 2.0 means your average win is twice the size of your average loss. Combined with win rate, this determines whether a strategy is viable.
The expected R-multiple per trade, accounting for both win rate and payoff:
Expectancy = (Win Rate x Average Win R) - (Loss Rate x |Average Loss R|)Expectancy is the most complete single metric. A positive expectancy means the strategy makes money over a large sample of trades. A strategy with a 40% win rate can have positive expectancy if the average win is large enough relative to the average loss.
| # | Direction | Entry | SL | Exit | Profit/Unit | Risk/Unit | R-multiple |
|---|---|---|---|---|---|---|---|
| 1 | Long | $185.00 | $180.00 | $195.00 | +$10.00 | $5.00 | +2.0R |
| 2 | Long | $150.00 | $145.00 | $148.00 | -$2.00 | $5.00 | -0.4R |
| 3 | Short | $200.00 | $210.00 | $185.00 | +$15.00 | $10.00 | +1.5R |
| 4 | Long | $90.00 | $85.00 | $85.00 | -$5.00 | $5.00 | -1.0R |
| 5 | Short | $310.00 | $320.00 | $290.00 | +$20.00 | $10.00 | +2.0R |
Summary:
This strategy has positive expectancy. On average, each trade returns 0.82 times the amount risked. Over 100 trades risking $500 each, the expected profit is 100 x 0.82 x $500 = $41,000. This is a mathematical illustration, not a projection of actual results.
R-multiples require a defined initial SL. If you enter a trade without a SL, there is no denominator and R cannot be calculated. Every trade in Execute has a SL from entry — R-multiples are computed automatically.
See these concepts in action: Execute overview.
This is engineering infrastructure, not investment advice. All trading involves risk of loss.