Position calculators, risk and R-multiple

A position without calculation is a lottery. Most traders type in size “by eye”, move the stop because they “cannot lose that much”, and do not know their R-multiple until they close the trade. This lesson standardises the maths before the click: from the definition of 1R to a calculator that blocks a 10x mistake.

Lesson goal

• Define 1R, R-multiple and risk per trade as constants - not percentages out of thin air.
• Configure a position calculator for stocks, futures and FX with spread and commission included.
• Measure MAE/MFE to judge the quality of your SL and TP.
• Build a size scaling ladder based on Expectancy, not on gut feeling.
• Put hard limits in place: daily loss, max position, weekend risk.

The foundation - what 1R is

1R is the maximum loss you are willing to accept on a single setup if the market touches your stop loss and closes you out without slippage. Not P&L, not hope.

1R = (Entry - SL) * Size in PLN / account currency
For a long: Risk_PLN = (Entry - SL) * Quantity * Tick_value / Price (for futures/fx)
For a short: Risk_PLN = (SL - Entry) * Quantity

R-multiple of a trade = Realized_PnL / 1R
Example: risk 100 PLN, profit 180 PLN → +1.8R. Loss 100 PLN → -1R. Loss with slippage 130 PLN → -1.3R

Risk % = 1R / Trading_capital * 100%
Recommended: 0.25% - 1% per trade for beginners, max 2% for advanced traders with proven expectancy >0.3R

The rule that never changes: Size follows from the distance to your SL, not the other way round. First you set the technical SL (swing, structure), then you calculate the size so that SL = 1R. You never fit the SL to a size that “suits you”.

Calculators - 3 variants

1. Stocks (PLN, USD)

Inputs:
Capital: 20 000 PLN
Risk per trade: 0.5% → 1R = 100 PLN
Entry: 150.00 PLN
Technical SL: 147.50 PLN (swing low)
Risk per share = 2.50 PLN
Size = 1R / Risk per share = 100 / 2.50 = 40 shares
Position value = 40 * 150 = 6000 PLN
Leverage check: 6000/20000 = 30% of capital in the position - OK if the max is 50%

With spread and commission:
Round-trip commission = 2 * 0.19% * value? No - count it for real: min 5 PLN + 0.19%
Effective Risk = Risk + commission + spread/2
If the spread = 0.10 PLN and the commission is 6 PLN in total → Effective Risk = 100 + 4 (spread) + 6 = 110 PLN
Size adjusted = 100 / (2.50+0.25) = 36 shares

2. Futures ES/NQ

ES: tick 0.25 = $12.5
ATAS/Bookmap shows an SL of 10 ticks = 2.5 points
Risk 1R = $80 (0.5% of $16k)
Size = $80 / (10*$12.5) = 80/125 = 0.64 of a contract → 1 contract, but cut the risk to 0.32% or widen the SL? No - pick a market where SL * tick value is at most 1R.
Example: NQ tick 0.25=$5, SL 20 ticks=$100, size 1 contract = 1.25R → too much, move to MES (Micro ES: tick $1.25)
MES: 10 ticks * $1.25 = $12.5 → Size = 80/12.5=6.4 → 6 MES contracts = $75 of risk, ~0.94R, OK.

3. FX / CFD

EURUSD pair, PLN account, Entry 1.0850, SL 1.0830 = 20 pips
Pip value for 1 lot = $10, roughly 40 PLN (depends on the USDPLN rate)
Risk 1R = 100 PLN
Size = 100 PLN / (20 pips * 2 PLN per pip for 0.1 lot) = 100/40 = 0.25 lot? Calculate it exactly with your broker's calculator.
Always add: spread * size to the risk. If the spread is 1.5 pips, the effective SL = 21.5 pips.

Calculator template (Excel/Sheets/Notion):

R-multiple - the only currency a trader uses

You do not measure dollars or PLN per trade. You measure R.

An R curve, not a dollar curve:

Equity_R = Cumsum(R_multiple)
Max Drawdown_R = min(Equity_R - max(Equity_R))
Target: Max DD_R <8R at 0.5-1% risk. If it is >12R - the risk is too large or the setups are correlated.

MAE / MFE - do your SL and TP make sense

In Edgewonk, MFE/MAE is native. In Notion you add 2 columns and calculate it by hand from TradingView replay data.

The formula for an optimal SL from your data:

P95_MAE_winner = the 95th percentile MAE of winning trades per setup
Optimal_SL = P95_MAE_winner + a 0.2R buffer
If the current SL = 1R and P95_MAE_winner = 0.3R - you are wasting 0.7R of buffer, you can reduce the position or increase the size (because the risk per unit is smaller) - but the risk % stays the same.

Size scaling - the ladder

You do not scale because you “feel confident”. You scale because you have data.

Move between levels only after a weekend review, never during the day. Always round the size down.

Automation and safety

• A calculator on your phone: Build a simple Google Sheets file with 5 input fields and a QR code to your desktop. Calculation time <10s.
• A hotkey with a limit: The platform blocks a size larger than the calculator allows. If the calculator says 40 shares, a hotkey for 100 shares is blocked.
• A pre-trade checklist inside the calculator: Checkboxes: technical SL? (Yes/No), R within the daily limit? (Yes/No), Spread < limit? (Yes/No). If one answer is No - do not calculate the size, do not trade.
• The record: Every trade has a “Size_calc_id” field - a link to the row in the calculator. Audit it after a month.

When the plan says DO NOT TRADE

• You did not calculate the size before entering - you are clicking “by eye”. Close the platform and calculate, even if the setup runs away.
• Your SL is “because that is what I can lose”, not a technical level - you have no invalidation, so you do not trade.
• The effective risk including spread and commission is >1.2R instead of 1R - the market is too expensive, skip it or cut the size, do not move the SL.
• You already have 2R of open risk in other positions - another position breaks the 2R max open risk.
• The calculator shows the position would be >60% of capital just to fit inside 1R - the instrument is too volatile for your account, choose a micro contract or a smaller lot.
• After 2 losses in a row you want to double the size to “make it back” - that is martingale, not R-multiple. The plan says stop at 2R daily loss, not revenge.

The mistakes that cost the most

1. An SL fitted to the size: You want to buy 200 shares, so you place the SL at 0.10 instead of 0.50. The invalidation is fake, noise throws you out. 1R is always calculated from the technical SL.
2. Ignoring spread and commission: On the Warsaw Stock Exchange (GPW) and on small caps, a 1% spread and a minimum 5 PLN commission turn 1R into 1.4R. Over 100 trades that is 40R of hidden cost. Always add it to the risk.
3. Averaging a loss = pushing risk beyond 1R: You add to a losing position and the risk goes from 1R to 3R. That is a loan, not trading. One position, one SL, one risk.
4. A different R per trade with no data: Today you trade 0.3%, tomorrow 1.5% because the “setup looks certain”. You wreck expectancy and DD. A fixed R per level, changed only after a review.
5. No MAE/MFE: You do not know whether your TP makes sense. You exit at 1R when the MFE is 3R in 70% of cases - you leave 2R on the table because you do not trail.

A measurable exercise

The calculator and an R-multiple audit - 10 days.

1. Day 1: Build the calculator from the table above in Google Sheets. Add validation: if the % of capital in the position is >50%, the cell turns red and says “DO NOT TRADE”.
2. Days 2-10: For every setup (at least 15 demo or micro live trades) calculate the size with the calculator only. Log: planned R, realised R (with slippage), spread in R, commission in R, MAE, MFE.
3. Calculate:
   • Slippage_avg_R = AVG(Realised_R - Planned_R) for losses
   • Spread_Cost_R, the sum
   • MAE_p95_winner and MFE_avg
4. The result: Define the optimal SL per setup from P95_MAE. Work out whether scaling to 0.75% makes sense given your DD_R.
5. A one-page report: “My true trade cost = … R (spread+commission+slippage)” and “My SL should be … instead of … because of MAE”.

Test yourself

1. Capital 30k PLN, risk 0.5% = 150 PLN = 1R. Entry 100 PLN, SL 97 PLN. What is the size and the position value? Does it fit inside the 50% limit?
2. You buy 100 shares, spread 0.20 PLN, round-trip commission 10 PLN, technical SL 1.50 PLN. What is the effective risk in PLN and in R if the planned 1R is 120 PLN?
3. You have 3 open positions, each with 0.8R of open risk. Can you open a fourth one at 0.6R? Why?
4. Explain the difference between MAE and SL and why the MAE of winners is used to optimise the SL.
5. Calculate the Expectancy: 60 trades, 38% WR, AvgWin 1.9R, AvgLoss 1.1R. Which size level do you assign and why?

Frequently asked questions

Can I risk 2% because my account is small? You can, but the maths kills you faster. At 2% and 10 losses in a row you are down 20% of the account, and you need +25% to recover. At 0.5% you are down 5% and +5.2% brings you back. A small account means less risk, not more.

What if my broker does not allow a small share size? Use a CFD, a micro futures contract or an ETF with a lower price. If the minimum lot means 1R = 3% of the account, the instrument is too big for your account - reject it.

Is BE good management? Only if the MFE is >1R and you have a rule: you move to BE after 1R plus a spread buffer. Moving to BE after 0.2R guarantees you get thrown out before the target.

Can I use a different R for different setups? Yes, but only if you have at least 100 trades per setup and the expectancy differs by more than 0.2R. Otherwise a fixed R for all of them.

Is the online calculator from my broker enough? No, because it ignores spread, the % of capital limit, daily loss and MAE/MFE. Build your own - 20 minutes, and it pays for itself over a year.

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Risk is the only thing you control 100%. Price and profit are outside your control. If you do not control R, you do not control anything.

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