The R unit

Why trades are measured in risk units rather than money, and how that turns random outcomes into data you can improve.

Disclosure, not advice

The strategies, scores and signals here are produced by an algorithmic system and based on technical data only. They are not investment advice or a substitute for professional advice, we are not investment advisors. Trading involves risk, and every decision and action is solely the user's responsibility.

FoundationsLesson 3 of 343 min

The R unit

If one trade made 400 and another made 900, which was better? You can't tell. If the first risked 200 and the second risked 900 — now it's obvious. That's the whole idea of the risk unit.

What it is

One risk unit is the amount that would have been lost had the stop been hit. A gain of twice that is two units; a full stop-out is minus one. Once you measure this way, trades of every size in every stock become directly comparable.

The practical effect: you stop thinking "I made 1,200 today" and start thinking "I made two units today". That detaches emotion from the cash amount and puts attention back on decision quality.

Risk/reward ratio

Before entering, measure the distance to a reasonable target and the distance to the stop. The ratio between them is risk/reward. Under two-to-one in swing trading there's usually not enough edge to cover commissions, slippage and mistakes. In day trading one-and-a-half to one can work, but only with a high, stable win rate.

The target must be anchored to something on the chart — a prior high, a resistance level, the height of the pattern. A target invented to make the ratio look good is a lie you tell yourself.

Terms from this lesson

יחידת סיכוןR / Risk Unit: The amount that would be lost at the stop. Every outcome is measured as a multiple of it.
יחס סיכוי־סיכוןRisk / Reward Ratio: Distance to target divided by distance to stop. Measured before entry, never after.

Practical checklist

I logged how many risk units each trade made or lost
My target rests on a real level on the chart
Risk/reward was computed before entry

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