When you get -1R trade, you basically cut your losses perfectly and only lost the amount R you defined prior to entering the trade. Being able to make more on profitable trades than you lose on unprofitable trades is one of the most important ingredients of being profitable over the long term in the markets.Īnd as you can see, reward-to-risk thinking is integrated in the R-multiple concept. But what’s the point of using R and R-multiples? Glad you asked.īeing able to think in reward/risk is really important in trading. So the R-multiple is the amount profited (or lost) expressed as a multiple of your initial risk.Īny profit or loss can be expressed in R-multiples.Īll good. If you actually exited the trade at $120/shr, your R-multiple on that trade is 2R. In the previous example, if you get stopped out at $90, your R-multiple on that trade is -1R. R-multiples are – like the name implies – multiples of R. So your risk is $1,000 if you are stopped out => your R is $1,000. R or R-value is the initial risk taken in a trade, based on your stop loss.Į.g.: You buy 100 shares of stock XYZ currently trading at $100/shr, for a total of $10,000. Tharp., the well-known professional trading coach who wrote several trading books such as “ Trade Your Way to Financial Freedom” or “The Definitive Guide to Position Sizing”. R (aka R-value) and R-multiples is a concept developed by Dr.
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