Definition
Review results relative to your recorded initial risk.
Formula. Average of net trade P&L ÷ recorded risk amount. Only closed trades with a positive recorded risk amount are included.
Same money, different quality
| Trade | Risk at entry | Net result | R |
|---|---|---|---|
| A | $200 | +$600 | +3.0R |
| B | $2,000 | +$600 | +0.3R |
| C | $200 | −$600 | −3.0R — a stop was not honoured |
How it goes wrong
- Not recording initial risk
- Only closed trades with a positive recorded risk amount are included. Orderblock will not infer risk from a stop you might have moved, because an inferred R is worse than none.
- Recording risk after the fact
- Risk written down after the outcome is known is not risk, it is rationalisation. Log it at entry or leave it blank.
- Ignoring losses beyond 1R
- The distribution of R on losing trades is the cleanest available measure of discipline. Any cluster beyond −1R deserves a journal entry.
Questions
What is a good average R?
Positive, with losses tightly clustered near −1R. The average matters less than the shape: a +0.2R average with no losses beyond −1.1R describes a controlled process, while +0.5R with occasional −4R losses describes an uncontrolled one that has been lucky.
Why are some of my trades excluded?
Any closed trade without a positive recorded risk amount is left out of the average, because there is nothing to divide by.