R-multiples and SQN

What it is

An R-multiple is a trade's result divided by its initial risk. Risk £100 and make £250 and the trade is +2.5R; lose the full stop and it's −1R. Measuring in R lets you compare trades of different sizes and markets, and the average R per trade is your expectancy.

Van Tharp's System Quality Number (SQN) scores a set of R-multiples: SQN = √N × average R ÷ standard deviation of R, where N is the number of trades (often capped at 100 so large samples don't inflate it). Higher is better; Tharp suggested values above about 2 as good. It rewards consistent results, not just a high average.

How to spot it

• The journal works out R:R from your entry, stop and target, so record the stop on every trade.

How to use it

• Judge strategies by average R and SQN, not by money made, which depends on size.
• Look at the spread of R-multiples: a few huge winners or a steady stream of small ones.

Common mistakes

• Calculating R from a stop moved after entry; R uses the initial stop.
• Comparing SQNs from very different numbers of trades.

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