R-Multiple
A trade's result expressed as a multiple of initial risk. A trade that earns 2× the amount risked is a +2R winner.
An R-multiple normalises every trade outcome by the initial risk, making comparison between trades of different sizes meaningful. If you risked $100 and made $300, that is a +3R trade; if you risked $100 and lost $80, that is a −0.8R trade.
Thinking in R-multiples eliminates dollar-amount noise and lets you evaluate strategy quality across different account sizes. A system averaging +0.5R per trade has genuine edge; a system averaging −0.2R does not, regardless of position sizes.
Example
Risk $200 (stop distance × shares). Trade closes at +$400 profit → +2R. Trade stopped out for full loss → −1R. Over 20 trades averaging +0.6R per trade: total = 12R = $2,400 profit on $200 per-trade risk.
Related Terms
Expectancy
The average dollar amount you expect to make per dollar risked, calculated from your win rate and average win/loss sizes.
IntermediateMaximum Adverse Excursion (MAE)
The furthest a trade moves against you before it either recovers and wins or hits the stop-loss.
AdvancedMaximum Favorable Excursion (MFE)
The furthest a trade moves in your favour before it either closes at the target or reverses into a loss.
AdvancedProfit Factor
Gross winning trades divided by gross losing trades. A profit factor above 1.5 indicates a reliable positive edge.
BeginnerRisk-Reward Ratio
The ratio of potential profit to potential loss on a single trade. A 1:2 R:R means you risk $1 to make $2.
BeginnerScaling Out
Exiting a position in pieces as price advances, locking in partial profits while letting the remainder run toward a larger target.
IntermediateTrade Journal
A systematic record of every trade including entry, exit, size, reasoning, and outcome — the primary tool for improving a trading edge.
BeginnerWin Rate
The percentage of trades that close at a profit. High win rate does not guarantee profitability without a favourable risk-reward ratio.
Beginner