R-Multiple
Definition
R-multiple expresses a trade's profit or loss as a multiple of the initial risk (1R). If you risk $500 and make $1,500, that's a 3R trade. This standardizes performance measurement regardless of position size.
The R-multiple concept, popularized by Van Tharp, is one of the most useful frameworks for analyzing trading performance. By expressing every outcome in terms of the initial risk, you can compare trades across different instruments, account sizes, and time periods on an equal basis.
A losing trade that hits your stop is -1R. A winner at your target might be +2R or +3R. Over a series of trades, your average R-multiple (expectancy in R terms) tells you exactly how profitable your approach is. If your average R-multiple is +0.5R and you risk $500 per trade, you expect to make $250 per trade on average.
For prop traders, tracking R-multiples is superior to tracking raw dollar amounts because it accounts for the quality of trade management. PropJournal calculates R-multiples for every trade automatically based on your entry, stop loss, and exit, giving you a clear picture of your trading edge.
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