What is R and Expectancy?

R is simply the dollar risk per trade. It helps you determine how successful your trades are and is especially useful in evaluating trading performance in the StockTickr trading diary.

For example, if you buy 1000 shares of a $30 dollar stock and it goes up to $35 and you sell it for a $5000 gain - was that a good trade? Well, it depends.

How much were you risking in the first place? That is, how much would you have lost if the stock went against you? If your initial stop was at $20, your risk was $10,000. 1R in this case would have been $10,000. Your trade ended up to be a 0.5R trade since you ended up making half of what you risked.

What if your original stop was $29? In that case, 1R would have been $1,000. Your trade ended up to be a 5R trade - that is, you made 5 times the amount you were risking. This trade was far better than the first scenario.

Van Tharp invented this trading secret in his book, Financial Freedom Through Electronic Day Trading:

"The golden rule of trading is to keep losses at a level of 1 R as often as possible and to make profits that are high-R multiples."

StockTickr's trading log provides seamless support for R and expectancy taking all the manual work out of keeping track of it.