What Does 1R Mean in Trading?

Keep the initial risk as your denominator

Record the planned cash loss at the original stop for the starting position. If your journal includes estimated fees in that figure, use the same convention for every trade. Once the trade is on, keep the original recorded risk even if you move the stop or close part of the position. The new stop changes the risk still open while the initial value remains the basis for measuring the full trade.

Realized R-multiple = net closed trade P&L ÷ original planned cash risk.

A target of 2R is a planned reward relative to initial risk. Your realized R comes from the actual exits and net P&L. If you have no positive, documented initial risk for a trade, keep the cash outcome and leave its R-multiple blank.

Compare three closed trades

The average is +0.2R per trade. The cash total is +$165. With different cash risk on each trade, the average R describes a normalized result per trade. The cash total answers how much those trades earned or lost together.

Handle partial exits once per trade

Suppose you recorded $100 of initial risk and later closed the position in two parts. The exits contribute $105 and $35 before fees, and the total fees are $10. Net P&L is $130, so the full trade is +1.3R. Add the exits first, subtract costs once, and divide by the starting risk once.

See position sizing from a stop loss for the planned cash risk inputs. Once you have a series of closed trades, compare average wins and losses to see how the sizes and frequencies affect expectancy.