What Is an R-Multiple?
An R-multiple expresses a trade's profit or loss as a multiple of the amount risked, called R. Learn the formula, a worked example, and how to read R-multiples in a trading journal.
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In short. An R-multiple expresses a trade's profit or loss as a multiple of the amount you risked, called R. R is the distance between your entry price and your stop-loss, measured in dollars per unit and multiplied by position size. A trade that gains twice what you risked is +2R; a trade stopped out exactly at plan is -1R. R-multiples let you compare trades of different sizes, instruments, and account balances on the same scale.
What R actually means
R stands for the initial risk on a trade, set the moment you place your stop-loss. If you buy a stock at $50 and plan to exit at $45 if the trade goes against you, your risk per share is $5, and that $5 is 1R. Multiply it by position size and 1R becomes a dollar figure: 100 shares at $5 of risk each is $500 of total risk for that trade.
The concept was popularized by trading coach Van K. Tharp, who framed it as one of the "Golden Rules of Trading": never open a position without knowing exactly where you will exit if you are wrong, according to the Van Tharp Institute. That exit point is what defines R in the first place.
The R-multiple formula and a worked example
R-multiple equals the trade's profit or loss divided by the initial risk (R). A trade that makes twice its initial risk is a 2R gain; one that loses exactly the amount planned is a -1R loss; one that loses more than planned, because of slippage or a stop that was not honored, can be -2R or worse.
Take a concrete case: you buy a stock at $50 and set a stop-loss at $45, so 1R = $5 per share. You buy 100 shares, making your total risk $500. The trade works out and you exit at $60, a profit of $10 per share, or $1,000 total. Divide that by your initial risk: $1,000 / $500 = 2. This trade closed at +2R, meaning you made twice what you had risked.
| R-multiple | What it means | Example |
|---|---|---|
| +2R | Won twice the amount risked | Entry $50, stop $45, exit $60 |
| -1R | Lost exactly the planned risk | Stopped out at the planned stop-loss |
| -2R | Lost double the planned risk | Stop skipped, moved, or missed during a fast move |
| +0.5R | Small partial gain | Exited early, before the stop or target was reached |
Important. An R-multiple is only accurate if it is based on the stop distance you actually planned before entering, not one you widened after the trade moved against you. Moving a stop further away after entry inflates R and understates how much you were really risking.
R-multiple vs related metrics
| Metric | What it measures | Blind spot |
|---|---|---|
| R-multiple | A single trade's result relative to its planned risk | Says nothing about how often a strategy wins |
| Win rate | Share of trades that closed profitable | Can look strong while the strategy still loses money overall, see why win rate lies without R-multiple |
| Profit factor | Gross profit against gross loss across all trades | Does not show whether risk was sized consistently trade to trade |
R-multiple is the building block behind expectancy, the average R a strategy produces across many trades. A system that wins less often but keeps losses to -1R while letting winners run to +3R or +4R can outperform a system with a much higher win rate, a distinction covered in more depth in our guide to trading performance metrics.
Reading R-multiples in a trading journal
Logging R for every trade, not just the dollar profit or loss, makes patterns visible that raw numbers hide. A cluster of trades closing at +0.3R or +0.5R when the plan called for +2R targets often points to exiting winners too early. A string of losses beyond -1R usually means stops are being moved or skipped under pressure, a habit closely related to what is covered in how to keep a trading journal. A trading journal that records entry, stop, and exit for every trade can calculate R-multiple automatically instead of leaving it as manual arithmetic.
This article is for educational purposes only and is not financial or investment advice. Past R-multiple results and other historical performance figures do not guarantee future results, and every trade still carries the risk of loss beyond what was planned.
Log entries, stops, and exits automatically and see the R-multiple on every trade in the BitStat trading journal.
Frequently asked questions
What does 1R mean in trading?
How do you calculate R-multiple?
Can R-multiple be negative?
Is a higher R-multiple always better?
How is R-multiple different from risk-reward ratio?
Who created the R-multiple concept?
Why does R-multiple only work if the stop is honored?
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