$$ R-Multiples

The term R-Multiple was coined by Van Tharp. I first read about it in his book Trade Your Way to Financial Freedom. He treated the subject in depth in Chapter 5 of his book Financial Freedom Through Electronic Day Trading.

R-Multiple simply refers to the "reward" part of your reward-to-risk ratio. If you risk 1R per trade, most traders usually want at least 2R if not 3R or more in potential reward for their risk. In my trading, I consider a 5R+ return on a trade to be a "high R-Multiple."

In future posts, I will discuss the interrelationship between position sizing, trade win percentage, and R-Multiples.