Traders often say a setup was "a 3R trade" or that a loss was "just 1R". R is a unit of risk: it lets you describe any trade by how many times your planned loss it made or lost, instead of by dollars or percent. Once you think in R, trades of different sizes on different coins become directly comparable.
What 1R actually is
1R is the amount you lose if your stop-loss is hit. It is decided before entry, from your account size and your risk limit. A hypothetical trader with a 10,000 USDT account who risks 1% per trade has 1R = 100 USDT.
The size of the position is then whatever makes the distance from entry to stop cost exactly 1R. If the entry is at 100 and the stop is at 98, the stop is 2% away, so the position notional is 100 USDT ÷ 2% = 5,000 USDT. Leverage only decides how much margin that position needs; it does not change what 1R is.
1R, 2R, 4R: the same idea at different distances
Take the same hypothetical trade. A target at 102 is 2 away from entry, which is the same distance as the stop, so the trade is planned as 1R: win 100 USDT or lose 100 USDT. A target at 104 is 2R (200 USDT), and a target at 108 is 4R: 8% × 5,000 USDT = 400 USDT.
The stop and the size stay the same; only the target moves. A loss at the stop is always about -1R, whatever the target was. That asymmetry is the whole point: the further the target, the fewer wins you need.
The break-even win rate
If every loss is -1R and every win is +NR, you break even when the win rate equals 1 ÷ (1 + N), before costs. The table extends the hypothetical trade from above (entry 100, stop 98) and shows how a small cost moves the result.
| Target | Target price | Result if hit | Break-even win rate | With 0.05R costs |
|---|---|---|---|---|
| 1R | 102 | +100 USDT | 50% | 52.5% |
| 2R | 104 | +200 USDT | 33.3% | 35% |
| 3R | 106 | +300 USDT | 25% | 26.3% |
| 4R | 108 | +400 USDT | 20% | 21% |
Costs move these numbers. If fees and slippage on the hypothetical trade add up to 5 USDT, that is 0.05R: a 4R win nets about 3.95R and a stop-out costs about 1.05R, which is what the last column assumes. Tight stops make this worse, because the same fee is a larger fraction of a small R.
Expectancy: putting win rate and R together
Expectancy is the average result per trade in R: (win rate × average win in R) - (loss rate × average loss in R). Three hypothetical styles show why neither number alone tells the story, and that very different styles can end up with the same expectancy:
| Style | Win rate | Average win | Expectancy per trade | Over 100 trades |
|---|---|---|---|---|
| Far targets | 30% | 4R | 0.30 × 4 - 0.70 × 1 = +0.5R | +50R |
| Middle | 40% | 2R | 0.40 × 2 - 0.60 × 1 = +0.2R | +20R |
| Near targets | 60% | 1R | 0.60 × 1 - 0.40 × 1 = +0.2R | +20R |
The catch is that these inputs are not independent. A 4R target needs price to travel four times as far as a 1R target, so it is reached less often. You cannot simply pick 4R and keep the same win rate; the numbers must come from your own recorded trades.
What 4R feels like in practice
A low win rate means long losing streaks. At a 30% win rate, the chance of ten losses in a row somewhere in a sequence is far from zero; for any given ten trades it is roughly 0.7 to the power of 10, about 2.8%, and over hundreds of trades it will happen. At 1% risk per trade that streak is -10R, or about -10% of the account. A plan with a high R target is only usable if you can size and stomach that drawdown.
The reverse is also true: a 1R style with a high win rate feels comfortable, but a few full losses can erase many small wins, and costs take a bigger bite.
Common mistakes
- Choosing the target to get a nice R. Price does not know your ratio. Put the stop where the idea is invalidated and the target at a real level, then see what R that gives. If it is below what you require, skip the trade.
- Widening the stop after entry. A moved stop turns a planned 1R loss into a 2R or 3R one, and your R statistics stop meaning anything.
- Ignoring slippage. A stop that fills worse than planned makes the loss bigger than 1R. Record the realized R, not the planned one.
- Cutting winners early. Closing a planned 4R trade at 1R repeatedly changes the whole expectancy calculation.
Using R in a trade journal
For each trade, write down the planned R (reward ÷ risk at entry) and the realized R (what actually happened). After a few dozen trades, the average realized R and the share of trades that reached their planned target show whether your 2R or 4R setups really behave the way you assumed. BitMe's trade journal builds an automatic record from your closed futures trades, with win rate, profit factor and drawdown, which are the other half of the picture: see the trading journal guide.
This article is educational and uses hypothetical numbers; it is not financial advice.