What is an R-Multiple?

What is an R-Multiple in Forex Trading?

An R-multiple expresses a trade's profit or loss as a multiple of your initial risk, making performance comparisons objective across different instruments, timeframes, and strategies. If you define your risk as 1R (for example, 50 pips with a stop loss) and the trade generates 150 pips profit, that's a +3R winner. If it stops out at -50 pips, it's a -1R loser. This risk-normalized measurement system eliminates the confusion created by dollar amounts, percentages, and pip values, allowing traders to build consistent expectancy tracking.

How to Calculate R-Multiples

The R-multiple formula is straightforward: R-Multiple = (Exit Price - Entry Price) / (Entry Price - Stop Loss) for long trades. For example, if you enter EUR/USD at 1.1000 with a stop at 1.0950 (risking 50 pips, or 1R) and exit at 1.1100 (gaining 100 pips), your R-multiple is 100 pips / 50 pips = +2R. The same logic applies to short trades, calculating the R-multiple based on your predefined risk amount.

Benefits of R-Based Performance Tracking

• Normalized comparison: Compare a 30-pip scalp on GBP/JPY directly with a 200-pip swing trade on EUR/USD when both risked 1R, eliminating volatility and instrument differences from performance analysis.
• Expectancy calculation: Sum your R-multiples and divide by number of trades to get expectancy. If 50 trades average +0.4R, you make 0.4R per trade over time regardless of account size.
• System evaluation: A strategy producing +8R over 20 trades (expectancy +0.4R) beats one producing +2R over 30 trades (expectancy +0.067R), even if the latter had higher win rate.
• Psychological clarity: Thinking in R-multiples helps traders accept -1R losses as normal business costs while holding winners for +3R or larger, overcoming the disposition effect.
• Position sizing integration: When combined with position sizing, R-multiples ensure you risk the same percentage per trade, making performance truly comparable.

Practical Implementation

• Pre-define risk: Before every trade, calculate your stop distance and position size to establish exactly what 1R equals in pips and dollars.
• Set R-based targets: Instead of arbitrary pip targets, use R-multiples: scale out 50% at +2R, move stop to breakeven, trail remaining position targeting +5R or higher.
• Maintain R journal: Log every trade's R outcome in a trading journal. Track R-multiples by setup type (breakouts, reversals, continuations) to identify which strategies deliver best risk-reward.
• Calculate running expectancy: After every 20 trades, sum R-multiples and divide by 20. Positive expectancy above +0.25R typically indicates profitable strategy with proper execution.
• Communicate performance: Report results to investors or mentors using R-multiples (+47R over 100 trades) without revealing sensitive account size information.