R-multiple
R is the risk of one trade: the distance between the entry price and the stop loss. An R-multiple measures a result or a target in units of that risk. If a trade risks a certain amount and makes twice that amount, it made two R. A trade stopped out at its stop loss loses one R, plus fees and slippage.
Why traders use it
R puts trades of different sizes, coins and prices on one scale. A strategy with an average win of two R and an average loss of one R can be profitable even if it wins well under half of its trades. Looking at results in R shows whether the edge comes from how often a strategy wins or from how much it wins when it does.
Where it is used
- Targets: a take profit of a set number of R from the entry.
- Trailing stops: an R ladder moves the stop in steps of R once the trade is in profit.
- Sizing: with risk-based sizing, the loss at the stop, one R, equals a chosen percent of the capital, so every trade risks about the same amount.
- Results: average win, average loss and expectancy in R.
On Algonney
R is measured from the entry reference to the stop loss, before fees. A strategy can set its take profit in R, trail its stop with an R ladder, and an activation level can be set in R. Backtest results let you compare trades in R.
Related: stop loss, take profit, drawdown and Backtesting.