R and risk-to-reward: how to measure trades
A trade at +50 and a trade at +5,000 — which one was better? In money there's no answer: the result depends on position size. R makes trades comparable and immediately shows where a loss went beyond the plan.
What R is
R is the trade's risk, the amount you would lose at the stop. A trade's result expressed in R:
Risked 100, made 250 — the trade returned +2.5R. Risked 100 but lost 140 — −1.4R, which shows right away that the loss went beyond the plan.
Risk-to-reward ratio
Before entry you estimate the target: if the stop is 1% from entry and the target 3%, the potential ratio is 1:3. It determines the win rate you need to avoid losing:
| Risk : reward | Break-even win rate |
|---|---|
| 1 : 1 | 50% |
| 1 : 2 | 33.3% |
| 1 : 3 | 25% |
More on the link with the share of winning trades — in the article “Win rate: how much you need”.
Planned versus actual
A 1:3 ratio at entry is worth nothing if in practice profit is taken at 1R while losses run to 1.5R. That's why two actual numbers matter more than the planned ratio:
- the average R of winning trades — how much you actually take;
- the average R of losing trades — whether it goes beyond −1R.
If the average loss is −1.3R, you systematically break your stop. If the average win is 0.9R with a 3R target, you cut profits short.
A planned 1:3 is worth nothing if in fact profit is 1R and loss 1.5R.
R distribution
A histogram of R across all trades says more about a system than any single number. A healthy picture: losses sit tightly at −1R (stops are respected), profits stretch to the right, and rare 3–5R trades make the result. A worrying one: a “tail” to the left beyond −1.5R and almost all wins around +0.5R.
A tail of losses beyond −1.5R — stops get moved. Wins cluster at +0.5R — profits get cut.
Losses stand like a wall at −1R, profits stretch to the right, rare 3–4R trades make the result.
Losses should stand like a wall at −1R. A tail further left means stops aren't respected.
When R doesn't work
R only makes sense with a defined stop. A trade without a stop has no risk in the formula — and dividing by a “default risk” just produces random numbers. The same goes for grid bots: a grid has no per-trade stop, so its result is better measured in money and as a percentage of what you put in.
Cheat sheet: the trade in R before entry
One button adds these points to your pre-entry checklist — it will appear in every trade in the journal.
- Stop set before entryWithout a stop, R doesn't exist.
- Trade risk in money calculatedThat is 1R.
- The target pays off at my win rateBreak-even win rate = 1 ÷ (1 + R).
- The loss won't go beyond −1RI don't move the stop further from the price.
In the journal
Ordo Trade calculates the R of every trade with a stop, the average R of winning and losing trades, the R distribution and expectancy in R. The exit optimiser recalculates your history for a fixed target from 0.5R to 5R and shows where your result would have been better. For bots without a stop, R isn't made up.
In short: frequently asked questions
What is R in trading?
A unit of a trade's risk — the amount you would lose at the stop. Result in R = result ÷ planned risk.
What risk-to-reward ratio is considered good?
The ratio alone doesn't decide anything: what matters is that expectancy is positive at your win rate. At 1:2, more than 33% winning trades is enough, before fees.
Why is an average loss bigger than 1R a bad sign?
It means losses go beyond the planned stop: the stop gets moved or the position is closed later than planned.
