Risk Management
R-Multiple (Risk-Reward Ratio)
A standardised measure of trade performance expressed as a multiple of the initial risk — the core language of professional risk management.
Key rules
- 1R = the dollar amount risked (entry to stop × position size)
- Express all trade outcomes in R: +2R, −1R, +0.5R, etc.
- Minimum viable average R-per-winner depends on your win rate
- Never risk more than you planned — moving stops during a trade breaks the R system
- Track your average R over a large sample to calculate system expectancy
The R-multiple (or R) is the most useful way to measure and compare trade outcomes. R represents the amount you risked on a trade. Every trade result is then expressed as a multiple of that initial risk.
**How It Works** - 1R = the distance from your entry to your stop loss (in price terms), multiplied by your position size in dollars - A +2R result means you made twice what you risked - A −1R result means you lost exactly what you risked (your defined stop was hit) - A +0.5R result means you made half your risk amount
**Why R-Multiples Matter** They allow you to: 1. Compare trades across different position sizes, instruments, and account sizes 2. Calculate the minimum win rate needed to be profitable 3. Plan for long-term profitability mathematically
**The Math** Breakeven win rate = 1 / (1 + average R per win) Example: if your average winner is 2R and your average loser is 1R: Breakeven win rate = 1 / (1 + 2) = 33.3% This means you only need to win 1 in 3 trades to break even.
**Positive Expectancy** The goal is to have positive expectancy: (Win% × Avg Win in R) − (Loss% × 1R) > 0