What R is and how to calculate it

R is a trade result expressed in units of risk. "+2R" means the trade made twice what you were willing to lose. It's the fairest way to compare trades with each other.

Why not dollars or points

Is a $300 profit a lot? It depends on what you risked. With $100 at risk it's a great trade; with $600 it's half a stop. Points don't help either: 10 points on NQ and on EURUSD are completely different money. R puts everything on one scale: how many units of risk the trade made or lost.

The formula

1R = |entry − stop| × point value × size
Result in R = (exit − entry) × direction ÷ |entry − stop|

Direction is +1 for a long and −1 for a short. A stop hit exactly at its price gives −1R; an exit at a take three times further than the stop gives +3R.

Example: NQ futures

Long from 20,000, stop 19,990, exit 20,020. Risk is 10 points, the result is +20 points, so +2R. With a $20 point value and two contracts, 1R = 10 × 20 × 2 = $400 and the profit is $800.

Commission and spread

The broker doesn't see +2R but a little less. A $4.18 commission per contract and a 0.25-point spread on two contracts is 8.36 + 0.25 × 20 × 2 = $18.36, or 0.05R. The net result is +1.95R. Without subtracting costs the journal systematically flatters your stats, especially with tight stops.

How R helps

• Expectancy is the average trade result in R. A positive expectancy means the strategy makes money over time, even with a win rate below 50%.
• Comparing setups. A setup with +0.4R expectancy beats one with +0.1R regardless of position size.
• A daily limit is easy to set in R: for example, stop after −2R in a day.
• MAE and MFE in R show how far price went against the trade and in its favour — and help tune the stop and take.

Common mistakes

• Measuring R from the actual exit instead of the stop at entry.
• Moving the stop and recalculating risk after the fact.
• Forgetting commission and spread.

XELL Journal works out R, commission and spread for you — just enter the entry, stop, take and exit prices.