R-multiple, explained without the math degree

You have two winning trades. One made $900. The other made $300. Which one was better?

In cash, the first. It made three times as much money. But the first trade risked $600 to make its $900, and the second risked $100 to make its $300. Measured against what each one put at risk, the second trade did twice as well.

Both answers are true. They answer different questions. Cash tells you how much money you made. R tells you how each trade did against the risk you took on it. A journal needs both, and this post is about the second one.

What R is

R stands for risk. It is the amount you lose on a trade if your stop-loss is hit. 1R means one time that risk, 2R means twice that risk, and so on.

A trade's result in R is its result divided by that risk. Risk $100 and make $250, and the trade is +2.5R. Risk $100 and lose the $100, and it is −1R. Risk $400 and make $400, and it is +1R.

You can also calculate it from the prices, without any money involved.

For a long trade: entry at 100, stop-loss at 98, exit at 105. The risk is the distance from entry to stop-loss, 2 points. The move is from entry to exit, 5 points. The result is 5 divided by 2: +2.5R.

For a short trade: entry at 50, stop-loss at 51, exit at 48. The risk is 1 point. The move in your favor is 2 points. The result is +2R.

That is the whole calculation. Everything else in this post is about using it.

Why R makes trades comparable

Position size no longer matters. A trade at 1 lot and a trade at 5 lots can be compared directly, because each is measured against its own risk. A +2R trade is a +2R trade, whatever the position size.

Instruments and accounts line up. A gold trade, an index trade and a currency trade all become the same unit. So do trades on a $10,000 account and a $100,000 account.

Your stats survive a change in size. If you risk $100 a trade this year and $200 next year, your results in cash double while your trading may be exactly as good as before. In R, the numbers stay comparable across both years.

A full loss has a known size. If you are stopped out where you planned, the loss is −1R. A loss of −1.6R means something happened: slippage, a gap, or a stop-loss that moved or was never there. That alone is worth a note in your journal.

R and cash answer different questions

R does not replace cash. Cash is what goes into your account, what you pay your bills with, and what a prop firm's rules are written in. You need to know it.

R answers a different question: how well did your trading do against the risk you chose? Cash mixes two things together, the quality of the trade and the size you put on it. R separates them. That is why the same set of trades can look like a great month in cash, because a few large positions happened to win, and an ordinary month in R.

Look at both. When they tell different stories, the difference is your position size (and a little in fees), and that is worth knowing.

Win rate and average R, together

Your win rate on its own says little. What matters is the win rate together with how big your wins and losses are in R.

Put them together and you get your expectancy: what you make on an average trade, in R.

Say you win 40% of your trades, your average win is +2R and your average loss is −1R.

• The wins bring 0.4 × 2 = 0.8R per trade.
• The losses cost 0.6 × 1 = 0.6R per trade.
• Your expectancy is 0.8 − 0.6 = +0.2R per trade.

Over 100 trades that is +20R. If you risk $100 a trade, that is $2,000.

Now a trader who wins 70% of the time, with an average win of +0.5R and an average loss of −1.5R:

• The wins bring 0.7 × 0.5 = 0.35R.
• The losses cost 0.3 × 1.5 = 0.45R.
• The expectancy is −0.1R per trade.

The second trader wins far more often and still loses money. The first loses more often than not and makes money. You can only see this in R, because R puts the size of every win and loss on the same scale.

The break-even win rate follows from the same numbers. If your average win is twice your average loss, you need to win one trade in three to break even: one win of +2R pays for two losses of −1R. Any win rate above that, at that payoff, makes money.

How sure can you be?

A handful of trades can give you almost any average. Ten trades at +0.5R each might be a real edge or a lucky week. The more trades you have, the narrower the range your true average could be in.

So read your expectancy as a range, not a single number, and be careful with conclusions from a few dozen trades. This is also why it helps to have every trade in R from the start. The sooner your journal has a long, consistent record, the sooner the numbers mean something.

Getting R right

R is simple, but a few details decide whether it is correct.

Use the stop-loss you had when you entered. R measures the risk you took on at entry. If you later move your stop-loss to breakeven and record the new level, the risk looks like zero and the R cannot be calculated. If you move it closer, the risk looks smaller than it was and the R looks better than it was. Record the original stop-loss.

Partial exits use the average exit. If you close half at +1R and half at +3R, the trade is +2R, the average of the exit prices weighted by size.

No stop-loss, no R. If a trade had no stop-loss, there is no defined risk, so there is no R. That is a finding too: trades without a stop-loss are trades where you did not decide in advance how much you could lose.

Fees are not in the prices. R calculated from entry, stop-loss and exit leaves out commissions and swaps. Your cash result includes them. So a trade can be +1R and still show a little less than your risk in cash. How big the difference is depends on your broker's costs, and it is why R and cash never match exactly.

How Vink helps

R is calculated for you. Enter your entry, stop-loss and exit, or let Vink read them from a screenshot of your chart, and it works out the result in R. With partial exits, it uses the size-weighted average exit. If your number differs, you can overwrite it.

Every stat in R, cash or percent. The stats switch between R, cash and percent, so you can look at the same trades both ways and see where your position size changes the story.

Your edge, in R. Stats shows your expectancy in R with the range it could really be in, your win rate, your payoff (average win against average loss), the break-even win rate at that payoff, your total R and your deepest drawdown in R. Trades without an R are left out of these numbers, and Vink tells you how many there were.

What your mistakes cost in R. If you tag trades as mistakes or off-plan, Stats shows your expectancy with and without them.

A daily limit in R. Your personal daily loss limit can be set in R, so it keeps meaning the same thing as your account grows.

The boundary

R is only as good as the stop-loss you record. Vink calculates R from the prices you log. It cannot know whether that was the stop-loss you placed at entry or one you moved later. Record the original, and your R will be honest.

---

Cash tells you how much you made. R tells you how good each trade was against the risk you took. Keep both, calculate R from the stop-loss you set at entry, and judge your trading on your expectancy over many trades, not on your win rate or one good week.