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Van Tharp

R-Multiple

1 August, 2010

Just a quick explanation of R as I use it in my ES Trading logs.

R = Risk. Where Risk is the number of points in value from entry to initial protective stop.

So… When I risk 2 points between entry and initial stop this equals 1R.

If the trade exits at +3 points then the trade would be logged as a +1.5R trade (3pts/2pts).

If the trade hit a full stop with no slippage it would be logged as -1.0R trade (-2pts/2pts).

By calculating R rather than $ amounts we can all relate to the trades with whatever risk tolerance is comfortable for us. We are also able to collect these r-multiples and calculate all sorts of other stats. See the Trade Log Spreadsheet in downloads.

You’ll find a deeper explanation and more examples at Van Tharp’s site.

Note: I try not to use profit or loss as descriptors in my trading because these words are emotive and I want to keep as neutral with my trading as possible.

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