Wick

Thinking in R instead of dollars

The Math of an Edge

One unit of risk

Professionals rarely say 'I made $400'. They say 'I made 2R'. R is one unit of risk — the amount you lose if the stop hits — and expressing everything in R makes results comparable across account sizes and position sizes. A 2R winner is a 2R winner whether you risked $50 or $5,000. It also removes the emotional pull of the dollar figure, which is the point: the number that makes you greedy or scared is the one in currency.

Check yourself

You risk $200 on a trade and close it for $600 profit. In R that's…

  1. 3R correct
  2. $600R
  3. 0.33R

600 ÷ 200 = 3. Three times the amount you had at risk. The dollar amount changes with account size; the R doesn't.

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