Ask a trader how their last trade went and they say "made 400 dollars" or "up 3%". Neither answer tells you anything, because neither tells you what they risked to get it. A 400-dollar win on a trade that could have lost 4,000 is a poor trade that happened to work. The same 400 on a trade that risked 200 is an excellent one.
R fixes this with one division.
The definition
R is the initial risk on a trade - the distance from your entry to your stop, in money. The R-multiple is what the trade actually made or lost, divided by that.
R = |entry − stop| × position size
R-multiple = P&L ÷ R
A trade that hits its stop is exactly −1R. A trade that reaches a target twice as far away as the stop is +2R. A trade closed early, halfway to the stop, is −0.5R.
Why it is the only fair unit
Two traders run the same strategy. One has a 10,000 USD account, the other 1,000. In money, the first has results ten times larger. In percentage, both depend on which pairs they traded at which prices. In R, the two records are identical - if the strategy was followed. And if the records are not identical, the difference is the trader, not the account.
That is what makes R the unit a strategy's edge can be stated in. "This strategy averages +0.10R per trade over 2,810 trades" is a claim anyone can check, on any account size, in any market where the same rules were applied.
What good numbers look like
Small. Measured across the most liquid Binance perpetual futures on the daily horizon, with every cost included, the strategies that clear the NusaTerminal evidence gate average between +0.06R and +0.15R per trade, with 99% lower bounds between +0.007R and +0.06R.
A strategy claiming +1R per trade is either measured on a handful of trades or not measured at all. The arithmetic does not allow otherwise: +1R per trade means every trade, on average, reaches a 1:1 target - a strategy that never loses.
R and position sizing
R is what a position is sized to. You decide the fraction of your account one stop-out may cost - say 1%. That is R in money. Divide it by the distance to your stop and you have the position size. On a volatile pair the stop is wider and the size smaller; on a quiet pair the reverse; the money at risk is the same either way.
That is how the NusaTerminal engine sizes every trade, and it is why a backtest's results in R and a live account's results in R are the same units and can be compared directly.
R and everything else
- Win rate ignores size. R does not.
- Profit factor is the sum of positive R over the sum of negative R.
- Expectancy is average R, and it is the figure most worth knowing.
- Drawdown in R is how many risk-units the account fell from its peak - a strategy in a 12R drawdown after 200 trades is in an ordinary bad patch; one in a 12R drawdown after 20 is broken.