R-multiples for day traders: how to measure every trade in R

Two traders each make $1,000 this week. One risked $50 a trade to get there; the other risked $500 and got lucky on a couple of outsized winners. Their statements look identical, and they are not trading equally well. The number that tells them apart is the R-multiple: every result measured in units of what you planned to lose.

What R means

R is your initial risk on a trade: the dollars you would lose if your stop were hit, decided before you got in. An R-multiple is the trade’s result divided by that risk.

  • Make twice what you risked: +2R.
  • Get stopped out as planned: −1R.
  • Scratch the trade: about 0R.

Because every trade is expressed against its own risk, a 100-share trade and a 2,000-share trade sit on the same scale. That is the whole point.

How to calculate it

Initial risk is the distance from your entry to your stop, times your shares:

risk = |entry − stop| × shares

R-multiple = P&L ÷ risk

A long. You buy 500 shares at $20.00 with a stop at $19.80. Risk is $0.20 × 500 = $100. You sell at $20.50 for a $250 gain: +2.5R.

A short. You short 1,000 shares at $8.40 with a stop at $8.55. Risk is $0.15 × 1,000 = $150. You cover at $8.61 for a $210 loss: −1.4R. Losing more than 1R means the stop wasn’t where the trade said it would be, through slippage, a gap or a stop you moved. That gap between plan and outcome is exactly what R makes visible.

Scaling in. If you build the position in pieces, use your average entry and the full size, which is what you’d lose if the stop hit with everything on.

Why R beats dollars for reviewing your trading

  • It removes size from the picture. A big day on big size and a big day on good decisions look the same in dollars. In R they don’t.
  • It shows your expectancy in one number. Your average R per trade is what a typical trade has been worth, in units of risk. If it’s positive across a meaningful sample, your process has had an edge; if it’s negative, more size only makes the losses bigger.
  • It shows discipline. A run of −1.5R and −2R losses says stops are being moved or ignored, whatever the account balance says.
  • It compares setups fairly. A setup with a 40% win rate and +3R winners can beat one with a 65% win rate and +0.5R winners. Average R by setup or tag shows which is which; win rate alone doesn’t.

Mistakes that quietly break your R

  • Setting risk after the fact. R only means something if the stop is the one you planned at entry. Choosing it afterwards to make a trade look better defeats the purpose.
  • Mixing gross and net. Pick one basis and stick to it. Measuring some trades before commissions and others after makes your averages drift for reasons that have nothing to do with your trading.
  • Averaging over trades with no risk. A trade with no stop recorded has no R. Leaving it out is honest; counting it as zero is not. Know how many of your trades your average actually covers.
  • Reading too much into a small sample. Ten trades of +1R tell you little. Look at R over dozens of trades, then hundreds.

Tracking R in SpiceLog

On any trade, click Set risk under R Multiple and enter your stop price, or the dollars you risked if a stop can’t express it, such as a trade that scaled out and back in. A stop is converted against your average entry and the shares that opened the position, and the R appears straight away. You can also tag trades by setup to see how R splits across them.

SpiceLog measures R on gross P&L, before commissions and fees, the same basis Tradervue uses, and a Tradervue import keeps Tradervue’s own R. Trades without a risk are left out of every R figure, and Reports says how many trades an average covers, so a number from a handful of trades isn’t read as your whole book. With enough trades carrying a risk, Reports also shows your SQN in R-multiples.

New to importing? Start with how to export your DAS Trader Pro trade log, or bring your history across from Tradervue.

For education only, not investment advice. DAS Trader Pro is a trademark of DAS Inc., and Tradervue of its owner; SpiceLog is independent and not affiliated with or endorsed by either.