What is expectancy in trading? (R-multiples explained simply)

What Is an R-Multiple?

Coined by risk-management researcher Van Tharp, 1R represents the initial dollar amount you put at risk on a trade between your entry price and your initial stop-loss. If you risk $100 on a setup and close it for a net profit of $250 after commissions, that trade yielded +2.50R. If your stop-loss is hit and you lose $100 plus $5 in round-trip fees, the outcome is −1.05R.

The Mathematical Expectancy Formula

Once your outcomes are normalized into R-multiples, your strategy’s expectancy per trade is:

Expectancy (R) = (W × netWin) − [(1 − W) × netLoss], and in account currency: Expectancy ($) = Expectancy (R) × Dollar Risk (1R).

Worked Example

In this example, a BTCUSDT perpetual trade risks $100 (1R) with a 3.00:1 gross reward-to-risk and $7.00 (0.07R) in round-trip taker fees and slippage. That makes netWin = 2.93R and netLoss = 1.07R. At a 30% win rate (W = 0.30):

Expectancy (R) = (0.30 × 2.93R) − (0.70 × 1.07R) = 0.879R − 0.749R = +0.130R (+$13.00 per trade on average). Over 100 trades, a +0.13R edge generates an expected +13.0R (+$1,300) before compounding. Track your own realized expectancy automatically in the TradeProfy Private Journal.

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