If you risk 100 on a trade and it closes 250 up, the result is +2.5R. If it is stopped out for the full 100, it is −1R. If slippage makes the loss 120, it is −1.2R. The idea is generally credited to the trading author Van Tharp.
Because the unit is risk, results become comparable across account sizes, instruments and stop distances. A 40-pip winner in one market and a 3-point winner in another can both be recorded as +1R, which makes a mixed record readable.
R-multiples are the basis for expectancy, which is the average R per trade, and for drawdowns measured in R. They also make sizing visible: a record in which risk stays near 1R per trade has a very different meaning from one in which it drifts.
One caveat: R hides money. A −1R loss when you risked double is still −1R but costs twice as much. For habits that involve size, read the R result and the amount risked side by side.
To use R you need a defined initial risk for every trade, which means a stop or an invalidation level decided before entry. Trades without one cannot be expressed in R honestly.