Home Blog
R-multiples and expectancy
R is your initial risk on a trade — so a trade that made twice what you risked is +2R, and one that lost exactly what you risked is −1R. Expectancy is the average R per trade across a history, and it is the single number that actually answers whether you have an edge.
Why measure in R at all
A dollar figure alone answers "how much" but not "how much relative to what you were willing to lose" — a $500 win means something completely different to an account risking $50 a trade than to one risking $500 a trade, and a raw currency total can't tell the two apart. R converts every trade onto the same scale before any comparison happens, which is what makes the rest of this page, and the mistakes and formulas below, actually meaningful across different position sizes, different instruments and different account sizes at once.
What R actually is
The distance from your entry to your initial stop, converted to money by your position size. Fixed the moment you enter, and never re-based afterward — if the trade runs longer, moves in your favour, or you move the stop, R itself does not change; only the eventual result measured against that original number does.
The formula
R-multiple = net P&L ÷ initial risk, and both sides should already be correctly signed: a losing trade's net P&L is negative, so it produces a negative R without needing any separate direction adjustment. Use net P&L, after commission and swap, not gross — a trade that made money on price movement alone but lost money after its costs is a losing trade, and its R-multiple should say so.
Worked example
A clearly hypothetical 10-trade sample, invented to show the arithmetic, including one scratch and one partial close so the awkward cases are shown rather than hidden:
| Trade | Initial risk | Net P&L | R |
|---|---|---|---|
| 1 | $100 | +$250 | +2.50 |
| 2 | $100 | −$100 | −1.00 |
| 3 | $150 | −$150 | −1.00 |
| 4 (scratch) | $100 | $0 | 0.00 |
| 5 | $120 | +$240 | +2.00 |
| 6 | $100 | −$100 | −1.00 |
| 7 | $100 | −$110 | −1.10 |
| 8 (partial close) | $130 | +$65 | +0.50 |
| 9 | $100 | −$95 | −0.95 |
| 10 | $100 | +$300 | +3.00 |
Trade 4 shows R can land exactly at zero without being an error, and Trade 8 shows a partial close still gets one clean R value from its own actual net result against its own initial risk, no different in kind from a full close. Work out a single trade's R for yourself with the R-multiple calculator.
Expectancy
Expectancy (in R) = (win rate × average win in R) − (loss rate × average loss in R). From the table above: 4 wins, 5 losses, 1 scratch, out of 10. Average win +2.0R, average loss −1.01R. Expectancy = (0.4 × 2.0) − (0.5 × 1.01) = 0.80 − 0.505 = +0.295R per trade — which matches the plain average of all ten R values directly, since that is exactly what expectancy in R actually is.
The practical form: expectancy × trades per month gives an expected R per month. A hypothetical trader placing 15 trades a month at this same +0.295R expectancy would plan around roughly +4.4R a month. That is a planning average, not a forecast for any specific month — real months will land above and below it, sometimes by a wide margin, and the figure only describes what should show up on average over many months, not what will happen in the next one.
Why R beats currency
A 0.05-lot trade and a 2-lot trade become directly comparable the moment both are expressed in R, something a raw dollar figure never allows. R survives account growth cleanly, since a $500 loss on a $10,000 account and a $5,000 loss on a $100,000 account can both be the exact same −1R. It also makes rule sets built around percentage limits genuinely legible: "five losses to the daily cap" means something concrete once every trade is sized to a consistent R, in a way "some number of dollars" doesn't communicate nearly as clearly.
The four things that corrupt R
No stop at all. With nothing defining initial risk, there is no R to measure against — log a planned risk figure even on trades managed without a hard stop order.
Moving the stop before it's hit. R is fixed at entry; recalculating it from a moved stop after the fact quietly rewrites the plan to match what happened, rather than measuring what happened against the plan.
Using realised loss instead of initial risk. A trade you exited early at a smaller loss than your stop would have taken was still a trade risking your original stop distance — log the loss against that original risk, not against the smaller number you actually experienced.
Adding to a loser. Increasing size on a position already open changes the effective risk mid-trade in a way a single fixed R figure can't cleanly represent — decide in advance how averaging into a loser gets logged, and apply that choice consistently rather than case by case, since inconsistent treatment across a history makes every R figure derived from it impossible to trust or compare later.
What expectancy doesn't tell you
The order the trades arrived in, so nothing about how deep a drawdown ran along the way even if the average R per trade looks perfectly healthy — the same average can sit underneath a smooth curve or a rough one. And it needs a decent sample before the figure stabilises; a genuinely positive expectancy can still produce a losing streak long enough to end an account along the way, which is exactly what working out your own risk of ruin from real numbers, rather than the expectancy figure alone, actually measures.
See your own R distribution
The free trading journal logs every trade in R, by setup tag and by session — that breakdown, not the single overall average, is usually where the useful findings actually live, since an edge that's strong in one setup and weak in another gets averaged into a mediocre-looking overall number if it's never split apart. Prefer a spreadsheet you build yourself? The free template has the R-multiple formula already built in, and the risk per trade and position size calculators help set a consistent R before the trade, not just measure it afterward.
Questions
What does 2R mean?
A trade that made twice what you initially risked. If your initial risk was $100, a +2R result made $200. R always refers back to the risk you planned at entry, never to how much you actually ended up losing if the trade went wrong in some other way.
Is R-multiple the same as risk-reward ratio?
No, and conflating the two is the most common mistake made about both. Risk-reward ratio is planned, set before the trade, at entry — what you're hoping the payoff will be relative to your stop. R-multiple is realised, measured after the trade closes — what the payoff actually was. A trade planned at 1:3 risk-reward that got stopped out early is a realised −1R trade, not a −3R one, regardless of what the plan said going in.
What if I move my stop?
R is fixed at entry and never re-based. If you move your stop further away and the trade eventually stops out there, the loss is bigger than your original 1R, and R-multiple will correctly show something worse than −1R for that trade — which is exactly the point: R is supposed to penalise this, not quietly absorb it.
How do I calculate expectancy from my statement?
You need the initial risk for every trade, which most statements don't record on their own — only entry, stop and exit prices are typically logged automatically, and initial risk in R terms has to be reconstructed or tracked separately at the time of entry. Once every trade has an R value, expectancy is simply the average of all of them.
How many trades before expectancy is trustworthy?
The same rough guidance as most trade-based statistics: under about 100 closed trades, treat the figure as an indicator rather than a settled number, and expect it to move as more trades accumulate. A 10-trade sample, like the worked example on this page, is useful for learning the arithmetic, not for judging a real system.
R-multiple ·Expectancy ·Risk-reward ratio ·Stop loss ·Win rate ·R-multiple calculator ·Risk per trade calculator ·Position size calculator ·Trading journal spreadsheet
The 10-trade table above is invented to show the arithmetic, and the "expected R per month" figure is a planning average, not a prediction for any specific month. This is educational information about measuring your own trading, not financial advice. Trading carries risk of loss. Full risk disclaimer.