Why Use R-Multiples in Your Trading?

jfsrevg
2025-06-23

The concept of R-multiples was introduced by Dr. Van Tharp.

R stands for your unit of risk — specifically, how much you’re willing to lose on a trade if your stop loss is hit.

Examples:

🔹A -1R trade means you lost your planned risk amount.

🔹A +4R trade means you made 4 times what you initially risked.

Personally, I like to define R as a percentage of my account.

1R is 1R. The percentage stays the same.

The value increases as my account grows.

Why thinking in R-multiples helps your trading:

🔹It shifts your focus to risk vs reward, helping you evaluate trades more objectively.

🔹It forces risk management — you can’t use R without knowing your risk in advance.

🔹It makes losses psychologically easier to handle: most losing trades will just cost you 1R or less.

🔹It helps you focus on consistency and process, rather than obsessing over dollar amounts or account size.

Even as your account grows, a $10K loss feels manageable — "it’s just a -1R trade".

And a $100K gain doesn’t inflate your ego — "it’s just a 10R win".

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