Put simply R is a multiple of a trader's intended risk on a trade. It is a useful way to understand how to size your trades, when to take profits, and understand the trade risk in general.

Let's use an example of an imaginary trade where I want to buy a stock at $50, my stop will be at $45 and I intend to risk $100. To size the trade divide the dollar amount you wish to risk ($100) by the difference between entry and stop (50 - 45 = 5). Resulting in 100 / 5 = 20! To properly size this trade you buy 20 shares.

Trade Entry: $50
Trade Stop: $45
Difference: $5 (Entry - Stop)
Risk: $100
Size: 20 shares (Risk / Difference)

What does this all mean? It means that a 1R move in the trade (with full size) is $5 so the stock would have to go to $55 to have a 1R or $100 profit. If the trade is stopped out at $45 that would be a -1R move or -$100. If the stock goes to $60 that's a 2R move! Etc.

Once you understand R you realize it is a much more useful way to discuss trade outcomes and portfolio performance. If someone tells you they made $10,000 on a trade that may sound impressive but if they were risking $50,000 it becomes less so when you see that is a 0.2R profit.