Who it's for — For those ready to emotionally detach their brain from the "dollar value" of their trades to think like a purely statistical machine.
The concept of R-Multiple (Risk Multiple) replaces dollars and percentages with a universal unit of measurement: "R", which represents your predetermined Risk per Trade.
If you decided to risk $100 on a trade, your R in that trade equals $100.
- If the stop loss is hit exactly, you made -1R.
- If you hit the target and collect $300, you made +3R.
In simple terms — R is the currency of professional traders. They don't say "I made three thousand dollars today" (because it depends on how big the account is), but they say "this month I closed at +5R". Whether R is worth $10 or $100,000, the technical competence shown by the +5R is exactly the same. It allows evaluating a trader's *skills*, regardless of their *capital*.
Why use Rs?
- Journaling Standardization: When writing your Trading Journal, marking trades in R allows you to compare apples to apples. A trade where you risked little on a low-volatility asset might have yielded only $20, but maybe it was a great +4R.
- Emotional Neutrality: Losing $500 hurts psychologically because you associate those $500 with rent or a trip. Losing "-1R" is an aseptic data point that your brain processes as a "normal business cost".
Expectancy (Mathematical expectation)
By collecting all your trades in multiples of R, you can calculate the Expectancy of your trading system: the average R you make for every trade (winning or losing). If your Expectancy is +0.5R, it means that every time you click "Buy", on average you are printing money.
Summary Sheet
- What it is: The outcome of a trade divided by the initial risk in dollars.
- Goal: Losing trades should close at -1R. Wins should travel from +1.5R upwards.
- Slippage: Sometimes, due to Slippage, a planned loss can close at -1.2R.
Links
- risk-reward-ratio — The theoretical twin concept of R-multiples (which are the real outcome).
- risk-per-trade — The base (denominator) of this calculation.
- bronze-path
Module: Module 4 — Risk before profit
The first skill of a trader is survival.
