Dollars can mislead. A $200 gain on a trade risking $50 is very different from a $200 gain on a trade risking $1,000. R-multiple fixes that.
What is 1R?
1R is the amount you planned to risk before entering. If your planned risk is $100, then +2R means +$200 and -1R means -$100.
Planned risk vs actual risk
Planned risk is the amount you intended to lose if the trade failed. Actual risk is what you really exposed based on size, stop, premium, slippage, or leverage. The gap between the two is where many discipline problems hide.
Why R works across markets
Stocks, options, forex, futures, and crypto all have different sizing. R lets you compare the decision instead of the product. It answers: did this trade respect the plan?
Journal prompts
- What was my planned 1R?
- Did I risk more than planned?
- Was the setup worth the risk?
- Did I exit because of my rule or my emotion?
The practical rule
If a trade exceeds your planned risk, tag it even if it wins. Winning while breaking risk rules teaches the wrong lesson.