Risk Multiple Calculator
Calculate the R-Multiple of your trades to ensure you're taking smart risks. Professional traders focus on high R-multiples to stay profitable.
Loss per share
Profit per share
How to Use the Risk Multiple Calculator
The Risk Multiple (or R-Multiple) is a concept popularized by Dr. Van Tharp to standardize the measurement of risk and reward. Our calculator helps you instantly determine the quality of a trade setup.
- Select Position Type: Choose whether you are going Long (buying) or Short (selling).
- Enter Prices: Input your planned Entry Price, Stop Loss Price, and Target Price.
- Analyze R-Multiple: The calculator will show your "R" value. For example, a 3R trade means the potential reward is 3 times the risk.
- Check Viability: Use the calculated Break-even Win Rate to see if the trade fits your strategy's performance.
What is R-Multiple?
R-Multiple defines profit and loss in terms of your initial risk. "1R" represents the amount of money you risk on a single trade (the distance from Entry to Stop Loss).
- Risk (1R): The amount you lose if your stop loss is hit.
- Reward: The amount you gain if your target is hit.
- R-Multiple: The ratio of Reward divided by Risk.
For example, if you risk $100 to make $300, that is a 3R trade. If you lose the trade, you lose -1R. If you win, you gain +3R.
Why R-Multiple Matters
Thinking in terms of R-Multiples shifts your focus from "how much money can I make" to "how much am I risking to get this reward?" This is crucial for long-term survival.
- Standardization: It allows you to compare trades across different assets and timeframes.
- Performance Tracking: You can track your performance as "Total R" rather than percentage or dollar amount, which separates your skill from your account size.
- Expectancy: Knowing your average R-Multiple helps you calculate the mathematical expectancy of your system.
What is a Good R-Multiple?
While higher is generally better, realistic R-Multiples depend on your win rate:
- 1R or less: Requires a high win rate (>55-60%) to be profitable. Scalpers often trade with lower R-multiples but high accuracy.
- 2R - 3R: The "sweet spot" for many swing traders. Allows for a win rate around 40-50% while still generating solid profits.
- 5R+: Excellent, but often comes with a lower win rate (trend following strategies). You might lose many small trades (-1R) but make it up with one big winner (+5R).
Frequently Asked Questions
What is R-Multiple in trading?
R-Multiple is a ratio that expresses profit in terms of initial risk. If you risk $100 (1R) and make $300 profit, your trade has an R-Multiple of 3R. It standardizes performance measurement regardless of account size.
How do you calculate R-Multiple?
R-Multiple = (Target Price - Entry Price) / (Entry Price - Stop Loss Price) for long trades. For short trades, it is (Entry Price - Target Price) / (Stop Loss Price - Entry Price). It is essentially your Reward-to-Risk ratio.
What is a good R-Multiple?
A good R-Multiple depends on your win rate. Generally, 2R or higher is considered good for swing trading (allows for ~40% win rate). Trend followers often aim for 5R+ but have lower win rates. Scalpers may accept 1R-1.5R with high win rates.
Why is R-Multiple important?
R-Multiple shifts focus from dollar amounts to risk units. It helps you evaluate the quality of a trade setup before entering and allows you to track your true trading performance independent of your account balance.
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