The R-multiple formula
R is your initial risk per share or contract: the distance between your entry and your stop. The R-multiple is how many of those units the trade actually returned:
R-multiple = (exit − entry) ÷ (entry − stop)
This one formula works for both longs and shorts, because the signs flip together. For a long, the stop is below entry, so the bottom of the fraction is positive. For a short, the stop is above entry, so the bottom is negative, and a falling price produces a positive R.
You can enter any trade in the R-multiple calculator to check your own numbers.
Worked examples: longs and shorts
Each example uses the formula exactly as written above.
| Trade | Entry | Stop | Exit | Calculation | R |
|---|---|---|---|---|---|
| Long, target hit | 50 | 48 | 56 | (56 − 50) ÷ (50 − 48) = 6 ÷ 2 | +3R |
| Long, small win | 50 | 48 | 51 | (51 − 50) ÷ (50 − 48) = 1 ÷ 2 | +0.5R |
| Long, gapped past stop | 50 | 48 | 47 | (47 − 50) ÷ (50 − 48) = −3 ÷ 2 | −1.5R |
| Short, target hit | 100 | 103 | 94 | (94 − 100) ÷ (100 − 103) = −6 ÷ −3 | +2R |
| Short, stopped with slippage | 100 | 103 | 104.50 | (104.5 − 100) ÷ (100 − 103) = 4.5 ÷ −3 | −1.5R |
Notice the two losses worse than −1R. Gaps and slippage mean your stop does not cap your loss at exactly 1R. If you see many losses beyond −1R in your journal, that is information about your execution or the instruments you trade.
Why R beats dollars and percentages
Dollar results mix two things: how good the trade was and how big you sized it. A $500 win on a large position and a $50 win on a small one might be the same quality of trade. R strips size out.
- Comparable across markets. A +2R on a $15 stock and a +2R on a futures contract mean the same thing: you made twice what you risked.
- Honest about risk. A +$1,000 trade that risked $2,000 is only +0.5R. The dollar figure hides that you put a lot on the line for it.
- Links to sizing. If you size with a fixed risk per trade, R converts straight to dollars. With a $25,000 account risking 1%, that is $250 at risk; with a $2 stop distance, the position size calculator gives 125 shares, rounded down.
This is why many traders plan trades in R before they think in dollars. The risk reward calculator works the same way: target distance divided by stop distance.
Your average R is your expectancy in R
Log the R of every trade and you get a list you can analyse. Here are ten consecutive trades:
| Trade | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 |
|---|---|---|---|---|---|---|---|---|---|---|
| R | +3 | −1 | −1 | +0.5 | +2 | −1 | −1.5 | +1 | −1 | +4 |
Sum = 5R. Average = 5 ÷ 10 = 0.5R per trade. Win rate = 50%.
That average is your expectancy measured in R: across these ten trades, each one returned 0.5 times the amount risked, on average. If you risked $200 on each, the ten trades made 5 × $200 = $1,000.
An average of 0.5R from ten trades is a hint, not proof. Ten results can swing a lot on one big winner (trade 10 alone was +4R). Keep logging and look at the average again at 50 and 100 trades.
Common mistakes when using R
- Moving the stop, then measuring from the new stop. R must use your initial stop, the one in place when you entered. If you tighten the stop later and measure from it, every trade looks bigger than it was.
- No stop at all. Without a defined stop, R is undefined. If you trade without hard stops, write down your mental stop at entry so the trade can still be measured.
- Ignoring partial exits. If you sold half at one price and half at another, use the average exit price for the whole position, weighted by quantity.
- Forgetting costs. Commissions and fees reduce every result. For small accounts or very tight stops they can move R by a meaningful amount.
- Options. For a long option, a common choice is to treat the premium paid as 1R, since it is the maximum you can lose. Be consistent with whichever definition you pick.
Planning trades in R before you enter
R is not only for review. Before you place a trade, write down three prices: entry, stop and target. The stop defines 1R. The planned reward in R is (target − entry) ÷ (entry − stop), the same formula with the target in place of the exit.
A short checklist, used before every entry:
- Is the stop at a price where the trade idea is clearly wrong, not just a round number?
- Is the planned reward in R large enough for the win rate this setup has produced so far? The break-even win rate table shows the minimum.
- Does 1R in dollars match your fixed risk per trade, or do you need fewer shares?
- If price gaps past the stop, can you accept a loss larger than 1R?
After the trade, compare the planned R with the realised R. A habit of planning +2R and realising +0.8R on winners shows up quickly once both numbers sit side by side in your journal, and it is far easier to fix once you can see it.
How to log R in your journal
Add three columns to every trade: planned stop, initial risk per share (entry − stop), and R-multiple. Record the stop before the trade, not after, so you cannot rewrite it.
Once you have enough trades, group them by setup and compare the average R of each. A setup with a 35% win rate and an average of +0.5R is doing more for you than one with a 65% win rate and an average of −0.1R. You will only see that if you record R.
The trading journal spreadsheet has these columns with formulas filled in. A journal app that imports your broker fills can calculate R per trade and per setup once you give it your stop.