R-Multiple Calculator

How Reward-to-Risk Multiple (R-Multiple) Works

The R-multiple system, developed by trading psychologist Van K. Tharp, expresses every trade outcome as a multiple of the initial risk. This standardizes performance across different position sizes and markets, making it the most useful metric for evaluating trading system quality.

Definition:

R = Initial Risk = Entry Price − Stop Loss Price (as an amount, per share or contract)

Trade Outcome in R = Profit or Loss ÷ Initial Risk

Worked example:

• Entry: $50.00
• Stop loss: $47.50 → Initial risk R = $2.50 per share
• 100 shares → Total risk = $250
• Exit: $57.00 → Profit = $7.00 per share = $700

R-multiple = $700 ÷ $250 = +2.8R

This trade returned 2.8 times the amount risked.

A losing trade stopped out exactly at stop loss:

R-multiple = −$250 ÷ $250 = −1R

System evaluation using R-multiples:

Over 20 trades, a sample result set might be: +2R, −1R, +3.5R, −1R, +1.5R, −1R, +2R, −1R, +4R, −1R…

Average R per trade = Sum of all R-multiples ÷ Number of trades

An average of +0.5R per trade means you earn half your initial risk on every trade you take.

Minimum viable performance:

• Average R above 0: profitable system
• Average R above 0.5: strong system
• Average R above 1.0: exceptional, and worth verifying against a large sample before you believe it

The average R is the number to track, not the win rate. A system that wins 35% of the time at +3R and loses 65% at −1R averages +0.4R and makes money steadily. A system that wins 80% at +0.2R and loses 20% at −1R averages −0.04R and bleeds out, while feeling wonderful the whole way.

Position sizing integration:

Risk a fixed percentage of account per trade (e.g., 1% per R):

Position size = Account × 1% ÷ Initial Risk per share

This automatically scales position size so every trade risks the same account percentage regardless of volatility.