What Is R in Trading? Understanding Risk Units and R-Multiples
In professional trading, success isn’t just about profit—it’s about how much risk you took to get it. That’s where the concept of “R” in trading comes into play.
If you’ve ever heard someone say, “I made 3R on that trade,” you may have wondered what it means. This guide explains what R means in trading, how it’s calculated, and how it helps traders evaluate performance.
What Is R in Trading?
R stands for risk unit. It’s a standardized way to measure how much you’re risking on a single trade. Once your risk is defined, profits and losses are measured in multiples of that risk—called R-multiples.
For example, if you risk $100 on a trade and make $300, your return is +3R.
This helps remove emotional terms like “I made $500” and replaces them with context-aware results.
Why Use R in Trading?
- Normalize Results: Helps compare trades regardless of size
- Simplify Journaling: Track trades in consistent units
- Evaluate Strategy Performance: Use average R-multiple to gauge profitability
- Reinforce Risk Discipline: Helps maintain consistent risk across all trades
How to Calculate R
iniCopyEditR = Risk Per Trade = Entry Price – Stop-Loss Price (× Position Size)
Then:
iniCopyEditR-Multiple = Profit or Loss ÷ R
Example:
- Buy price = $50
- Stop-loss = $48
- Risk = $2 per share
- Target = $56 (Profit = $6)
R = $2
R-Multiple = $6 ÷ $2 = 3R
How Traders Use R-Multiples
- Set realistic trade goals: e.g., 2R or 3R per trade
- Review losing trades: -1R indicates a trade hit stop-loss as planned
- Maintain win/loss balance: You don’t need high win rates if your average win is 2R+
Risk-Reward Ratio vs R
- Risk-reward ratio shows the potential return compared to risk (e.g., 1:2)
- R quantifies actual outcome or target based on that risk
| Concept | Example |
|---|---|
| Risk-Reward | 1:3 means risking $100 to make $300 |
| R | 3R = $300 return if $100 was risked |
Final Thoughts
So, what is R in trading? It’s your risk blueprint. Using R-multiples keeps your strategy objective, scalable, and easier to evaluate over time. Mastering this concept can transform your trading mindset from emotional to mathematical—making success more sustainable.
FAQs
Q1. Can I use R for all asset types?
Yes. R applies to stocks, forex, crypto, futures, and options trading.
Q2. What is a good average R?
It depends, but many professional traders aim for 1.5R to 3R average per winning trade.
Q3. Is R used only in journals?
No—it’s also used in trade planning and risk management systems.
Q4. What happens if I don’t use a stop loss?
You can’t calculate R without defining risk—so stop-loss is essential.
Q5. Can I automate R-based sizing?
Yes, most platforms support custom scripts or calculators based on R formulas.
