Understanding R-Multiples: The Key to Consistent Position Sizing

R-multiples are one of the most powerful concepts in trading analytics, yet many traders overlook their importance. An R-multiple expresses your trade outcome in terms of your initial risk (R), allowing you to compare trades across different instruments, account sizes, and time periods.

What is an R-Multiple?

If you risk $100 on a trade and make $300, your R-multiple is 3R. If you lose $50 on a $100 risk, that's -0.5R. This simple standardization transforms how you analyze performance.

Why R-Multiples Matter

1. Objective Comparison When you express all trades in R-multiples, a winning trade on a $5 stock is directly comparable to one on a $500 stock. This removes the psychological bias of focusing on dollar amounts.

2. Expectancy Calculation Your system's expectancy is simply: (Win Rate × Average Win R) + (Loss Rate × Average Loss R). A positive expectancy means you have an edge.

3. Position Sizing Integration Once you know your expected R per trade, you can optimize position sizing. Risking 1% of capital means 1R = 1% of your account.

Implementing R-Multiple Tracking

In Practice—Process, R-multiples are calculated automatically when you log your initial risk. The Analytics section breaks down your performance by:

Start thinking in R, and you'll develop a more systematic approach to trading that transcends the emotional attachment to dollar amounts.