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Market Foundations + Forex Mechanics · Risk Management Math

The R-multiple

Explain what 1R, 2R, and 3R mean in plain dollar terms.

3 min read+25 XPLesson 56 of 110
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Market Foundations + Forex Mechanics

Risk Management Math

Lesson 56 of 11051%
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Lesson 56 of 110Market Foundations + Forex MechanicsRisk Management Math

Today's tiny win: make one idea click.

Explain what 1R, 2R, and 3R mean in plain dollar terms.

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R is your unit of risk

R stands for risk. 1R is the dollar amount you decided to put on the line for a single trade. If you risk $5 on a EUR/USD trade, then 1R equals $5. That number gets defined before you enter, not after. R is shorthand. It lets you talk about results without dragging account size or pip values into every sentence.

Wick points at a chalkboard showing 1R equals $5 on a $500 account, with a stop costing 1R and targets at 2R and 3R, teaching that R measures every result against the risk you set first.1R = $5 on $500 at 1%Stop hit = -1R = -$52R target = +$103R target = +$15
Wick saysR is the risk you pick before the trade. On $500 at 1%, 1R is $5.

Say you trade a $500 account and you risk 1 percent per trade. Your 1R is $5. If a trade hits your stop, you lose $5. If a trade hits a 2R target, you make $10. If it hits 3R, you make $15. Same setup. Same risk. Different reward. R lets you describe outcomes without rebuilding the math each time.

R also forces a useful habit. You must define risk before you define reward. The stop comes first. The entry comes next. The target gets measured in R relative to that risk. If the chart can only offer 0.5R of room before structure breaks, that is a low-quality setup. If the chart offers 3R of clean space, the reward is structural, not wishful.

Wick points at a practice chart with a stop line marked 1R below the entry and a target marked 3R above it, showing that the target is measured in multiples of the risk.Set the stop firstPractice chart3R targetEntryStop = 1R
Wick saysSet the stop first, then measure the target in R from that same risk.

Most beginners measure trades in dollars: 'I made forty bucks.' Pros measure in R: 'I closed a 2R winner on EUR/USD.' Why? Because the dollar number changes with account size. A 2R win on a $500 account is $10. The same 2R on a $50,000 account is $1,000. The skill is identical. R keeps the focus on the skill.

Wick holds two cards: a green card saying I closed a 2R winner and a coral card saying I made forty bucks, teaching that R keeps the focus on skill instead of account size.Say thisI closed a 2RwinnerNot thisI made fortybucks
Wick saysTalk about trades in R, not dollars, so the skill looks the same at any account size.

Recap: 1R is your defined risk in dollars. 2R is twice that, 3R is three times that. Define R before the trade and measure outcomes in R after.

Knowledge check

Answer before moving on.

0 / 3 answered

1. You risk $5 on a trade and close it for $15 in profit. What did the trade pay in R?

2. On a $500 account risking 1 percent per trade, how much is 1R?

3. Why do experienced traders prefer R over dollar amounts when reviewing trades?

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