Volatility & R-Multiple Metrics
These metrics normalize trade results relative to risk, making strategies comparable regardless of dollar amounts or instrument prices.
R-Multiple Metrics (Van Tharp)
R-multiples express every trade as a multiple of risk (1R = the average loss per trade). This system, developed by Dr. Van Tharp, separates strategy quality from position sizing.
| Metric | Formula | Unit |
|---|---|---|
| 1R | Average absolute loss (base risk unit) | $ |
| R-Expectancy | Mean of (P&L / 1R) across all trades | R |
| RM StdDev | Standard deviation of R-multiples | R |
| SQN-SO | (R-Expectancy / RM StdDev) × √(Total Trades) | score |
| TS Index SO | (Net Profit × Profit Factor) / Max DD | index |
| Dollar Expectancy | (WR × Avg Win) - ((1-WR) × | Avg Loss |
Key Metrics Explained
1R (One R)
Your base risk unit — the average dollar loss per losing trade. All R-multiples are expressed relative to this. If 1R = $500, then a 3R win means you made $1,500.
R-Expectancy
The average R-multiple per trade. An R-Expectancy of 0.35 means you earn 0.35R per trade on average.
| R-Expectancy | Tier |
|---|---|
| ≥ 0.5R | Excellent |
| ≥ 0.3R | Good |
| ≥ 0.15R | Caution |
| < 0.15R | Failed |
SQN (System Quality Number)
The definitive measure of system quality, accounting for expectancy, consistency, and sample size:
SQN = (R-Expectancy / R-Multiple StdDev) × √(Total Trades)
| SQN | Van Tharp Rating | Tier |
|---|---|---|
| ≥ 5.0 | Superb | Excellent |
| ≥ 3.0 | Excellent | Good |
| ≥ 2.0 | Average | Caution |
| < 2.0 | Poor | Failed |
ATR-Normalized Metrics
ATR (Average True Range) normalization makes metrics comparable across instruments with different price levels.
| Metric | Formula | Unit |
|---|---|---|
| ATR | Average of all ATR values at trade entry | pts |
| Avg Trade Normalized | Mean of (P&L Points / ATR Points) per trade | ATR |
| Max DD ATR | Max Drawdown in Points / ATR | ATR |
Info
ATR-normalized metrics require ATR data in your import file. If not provided, these metrics show as N/A.
Avg Trade Normalized
Your average trade P&L expressed as a multiple of ATR. A value of 1.5 means your average trade captures 1.5x the instrument's daily range — an efficient use of volatility.
Max DD ATR
Maximum drawdown expressed in ATR units. Useful for comparing drawdown severity across instruments.
Tip
R-Expectancy and SQN feed directly into your Confidence Score — improving these metrics is the fastest way to improve your overall CSI.
Tip
Ready to analyze your own strategy? Start your free trial — no credit card required.