Risk per trade, R-multiples, and expectancy

What “R” means

R is the amount of money you planned to risk on a trade: the distance from entry to stop, times your position size. If you risk $100, then 1R = $100 for that trade.

Every outcome can then be written in R:

• Stopped out as planned: −1R
• Exited at a profit of $250: +2.5R
• Exited at breakeven: 0R
• Slipped past your stop and lost $130: −1.3R (a sign something in execution needs fixing)

Why R beats dollars and percent for learning

Dollar results depend on account size, which changes over time. R results only depend on how well the trade played out relative to the plan. That makes trades from different months, accounts, and sizes directly comparable. It is also why research on this site reports results in R by default.

Expectancy: the number that matters

Expectancy tells you how much you can expect to make, per trade, over many trades, in R:

Expectancy = (Win rate × Average win) − (Loss rate × Average loss)

Example: a strategy wins 40% of the time, the average win is 2.5R, and the average loss is 1R.

Expectancy = (0.40 × 2.5) − (0.60 × 1) = 1.0 − 0.6 = +0.4R per trade.

Over 100 trades at a 1% risk, that is roughly +40R, before costs. The same strategy with a 1:1 payoff would need a win rate above 50% just to break even. Win rate on its own tells you very little.

Losing streaks are part of the math

Even a solid edge produces long losing streaks. As a rough guide, the longest losing streak you should expect over n trades is about log(n) ÷ log(1 ÷ loss rate). With a 50% loss rate over 100 trades, that is about 6 to 7 losses in a row. With a 60% loss rate, it is around 9.

Now look at what that streak does to the account at different risk levels:

Risk per trade	Account after 10 straight losses	Gain needed to recover
0.5%	−4.9%	+5.1%
1%	−9.6%	+10.6%
2%	−18.3%	+22.4%
5%	−40.1%	+66.9%

The edge is the same in every row. Only the sizing changed. This is why risk per trade is the first rule in any serious trading plan.

Terms used here: R-multiple, expectancy, drawdown.

Practical rules that come from this

1. Fix risk per trade before you look for entries. Write it down.
2. Log every trade in R, including the ugly ones. Skipping losers from the log makes expectancy look better than it is.
3. Don’t judge a strategy on 5 trades. Small samples are mostly noise. Thirty trades is a common rule of thumb for a first look, not a proof: depending on the win rate and payoff, even 30 to 100 trades can leave wide uncertainty, so treat early results as provisional.
4. Watch for losses bigger than −1R. They usually mean moved stops, slippage, or no stop at all.

Use the risk/reward calculator to check whether a planned trade’s payoff justifies its win rate.

Sources

• U.S. SEC, Investor.gov, “Stop Order”: once triggered, a stop order becomes a market order, and the fill “may differ from the stop price, especially in a fast-moving market.” Accessed November 6, 2026.
• U.S. CFTC, “Customer Advisory: Understand the Risks of Virtual Currency Trading”: warns of volatile price swings and flash crashes, notes that leveraged traders “may lose more than their initial investments,” and that “there is no such thing as a guaranteed investment or trading strategy.” Accessed November 6, 2026.

Education only, not financial advice.