1. What it is
R is the amount you lose if the trade goes against you and the stop is hit. Not the account size, not the number of contracts — just the loss. A result of plus 2R means the trade made twice what it risked.
2. How it is computed
risk = |entry − planned stop| × tick value × size
R = (result − fees) / riskThe planned stop, not the actual one. If you moved the stop, the trade's R is still measured against the risk you took when you entered — otherwise a trade you cut early looks less risky than it was.
3. What it rests on
That risk is the right unit of account — that what matters is not how much you made, but how much you made relative to what you put at stake.
This is close to a definition rather than an assumption. Its value is practical: it makes two trades comparable even if the account size, the instrument or the position size differed.
4. Where it is wrong
R says nothing about whether a method works. It is a unit, not a result.
The common error is to treat a hit rate as if it were an answer. It is not, without the R attached: twenty-nine percent with a 2.5R target makes money, sixty percent with a half-R target loses it. Any win rate quoted without the reward-to-risk is half an equation.
Two smaller traps:
R assumes the stop was reachable. If the instrument gapped past it, the realised loss is larger than 1R and the arithmetic quietly understates the damage.
And R on a trade with no planned stop is not computable. Not "approximately one R" — not computable. A trade without a planned stop belongs outside the statistics, not estimated into them.
5. Is there a measurement
Not of R itself — it is a definition. But the first lab note on this site is an example of what R is for: a setup marker with a twenty-nine percent hit rate, where the arithmetic in R showed the method was losing before any opinion did.
Not measured yet.