Let’s make it simple
Before a board game, you decide how many tokens you can use. You do not borrow the whole classroom's tokens because you feel certain of the next dice roll. A paper plan also needs limits before its outcome is known.
Understand the idea
For a simple pretend long position, planned loss per unit is entry minus the planned exit level. Quantity times this distance gives a planned price loss before costs. These are classroom numbers, not a recommendation about how much anyone should risk.
Suppose the practice loss budget is 10 tokens. Entry is 20 and the planned exit is 18: the distance is 2. The simple quantity is 10 divided by 2, or 5 units. Fees or a worse exit can make the actual loss larger.
A stop order is not a magic shield. Once triggered, a stop-market order becomes a market order, and its execution price is not guaranteed. A stop-limit order may not execute. Gaps, fast movement and thin trading can defeat a neat paper estimate.
Read exact candle values
| Candle | Open | High | Low | Close |
|---|---|---|---|---|
| A | 20 | 22 | 19 | 21 |
| B | 21 | 22 | 17 | 18 |
| C | 17 | 18 | 16 | 17 |
A small worked example
Five pretend units entered at 20 and sold at 18 lose 10 tokens before costs. If a gap leads to an exit at 17, the price loss is 15 tokens. A planned level is not a guaranteed fill.
Your turn
Calculate quantities for a 12-token practice budget with entry 30 and planned exit 27. Then calculate the price loss if those units actually exit at 26.
Compare your exercise with a model response
12 divided by (30-27) gives 4 units. An exit at 26 loses 4 times 4 = 16 tokens before costs.
Pause & think
Check your understanding
Write an answer, then compare it with the explanation. This is self-study, not an automatically graded test.
Compare all three answers to unlock the review button.
Fictional examples. Education only; no pattern guarantees a result. Course information