ForexMechanics Educator Pack v1.0.0 | 27 October 2026 | CC BY 4.0
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Twenty reusable forex diagrams

Original editable teaching diagrams. All numerical examples are hypothetical. Use the supplied caption, source and license when adapting a figure.

EUR/USD moves from 1.0842 to 1.0843, a change of 0.0001 USD per EUR, equal to one pip. A 100,000 EUR lot changes by 10 USD.

D01 - Anatomy of one pip

One pip is a price increment. Its cash value also depends on contract size and account currency.

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A 0.01 JPY-per-USD pip times 100,000 USD per lot produces 1,000 JPY per pip per lot. At 0.006 EUR per JPY, this is 6 EUR per pip per lot.

D02 - Convert a JPY pip into EUR

Carry the units through the calculation before converting the quote-currency pip value into the account currency.

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A 10,000 EUR balance at a 1% budget gives 100 EUR. Dividing 100 EUR by 25 pips times 6 EUR per pip per lot gives 0.666666 lots. Rounding down to the 0.01-lot step gives 0.66 lots.

D03 - From risk budget to position size

Divide the cash budget by risk per lot; apply the volume step after calculating the unrounded size.

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The 0.01-lot steps from 0.64 to 0.68 create risks of 96, 97.50, 99, 100.50 and 102 EUR. The 100 EUR budget lies between 0.66 and 0.67 lots; 0.66 lots risks 99 EUR.

D04 - The lot step can cross a cash budget

Theoretical size is 0.666666 lots. A 0.67-lot rounded-up position exceeds the hypothetical 100 EUR budget.

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Win contribution is 0.45 times 1.8, or 0.81R. Loss contribution is minus 0.55R. Gross expectancy is 0.26R, then 0.30R costs leave minus 0.04R per trade.

D05 - A gross edge can disappear after costs

Costs are deducted once per trade from these explicitly gross payoffs; an already-net journal requires different treatment.

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A line of net expectancy versus win rate crosses zero at 46.43%. The break-even rate equals (1R loss plus 0.30R cost) divided by (1.8R win plus 1R loss). At 45%, net expectancy is minus 0.04R.

D06 - Break-even win rate includes costs

Break-even is a model threshold, not a forecast of the win rate a trader or strategy will achieve.

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Long EUR/USD at 1.10 has plus 10,000 EUR and minus 11,000 USD legs. Long GBP/USD at 1.25 has plus 10,000 GBP and minus 12,500 USD. Long AUD/USD at 0.65 has plus 10,000 AUD and minus 6,500 USD. Their USD legs total minus 30,000 USD.

D07 - Three pair names, one shared USD leg

Signed currency legs reveal a common USD direction. These exposure units are neither a borrowed cash balance nor a maximum-loss amount.

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The common quote-currency leg is minus 30,000 USD exposure. Three separate 100 USD planned stop-loss budgets total 300 USD. The two quantities answer different questions and neither is a guaranteed worst-case portfolio loss.

D08 - Exposure and stop budgets measure different things

Currency direction, planned price-move loss and execution uncertainty require separate interpretations.

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ForexMechanics. "Exposure and stop budgets measure different things" (D08), Educator Pack v1.0.0, 27 October 2026. https://forexmechanics.com/educators/#D08 . CC BY 4.0: https://creativecommons.org/licenses/by/4.0/ . Changes: [describe your changes, or state unchanged]. Provided as-is.

Sequence A has three wins then two losses; sequence B is loss, win, loss, win, win. Both start at 10,000 USD and end at 10,781.10 USD, but maximum drawdown is 19% for A and 10.9% for B.

D09 - Same outcomes, different equity paths

The order of the same multiplicative returns leaves this endpoint unchanged while changing peak-to-trough drawdown.

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The equity path rises from 10,000 through 11,000 and 12,100 to 13,310 USD, then falls to 11,979 and 10,781.10 USD. The peak-to-trough loss is 2,528.90 USD, or 19% of the peak.

D10 - Drawdown is measured from the previous peak

A positive result versus the starting account can coexist with a material drawdown from an intermediate high.

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The table keeps completed trades A-01 at plus 1R, B-02 at minus 1R and D-04 at plus 2R. It excludes an explicitly known duplicate B-02 and a planned C-03 target of plus 2R. Three of five records are valid completed observations.

D11 - Five records are not five completed trades

Valid sample: three unique completed trades. Their realised net mean is (1 − 1 + 2) / 3 = 0.667R.

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A trade moves through planned, open, partially closed and fully closed states. A planned plus 2R target is distinct from a fully closed plus 2R realised result even when the numbers happen to match.

D12 - A target and a realised outcome are different fields

A completed-trade performance sample needs the defined completed record and realised outcome, not an unexecuted target.

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New notional is 0.50 times 100,000 times 1.10, or 55,000 USD. At 30:1, new margin is 1,833.33 USD. Equity 5,000 minus existing margin 1,000 minus new margin 1,833.33 leaves free margin 2,166.67 USD.

D13 - Account margin arithmetic

Equity is held fixed on entry. The simplified model excludes broker tiers, offsets, entry costs and close-out rules.

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The collateral calculation is 55,000 USD notional divided by 30, giving 1,833.33 USD margin. Separately, a 20-pip planned move times 0.50 lots times 10 USD per pip per lot gives a 100 USD planned price-move loss.

D14 - Margin is collateral, not a loss budget

At a fixed position size, changing leverage changes this margin calculation; it does not change the cash value of the same price move.

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Entry is 1.1000, planned stop is 1.0980 at 20 pips adverse, and actual fill is 1.0965 at 35 pips adverse. The full price-move loss is 35 times 0.50 times 10, or 175 USD; commission is 3.50 USD, giving total loss 178.50 USD.

D15 - A stop trigger is not a guaranteed fill

The 35-pip entry-to-fill distance includes the planned 20 pips. Do not add them again or deduct a separately imagined spread.

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Starting capital 10,000 USD loses 2,500 USD, a 25% decline, leaving 7,500 USD. Gaining the same 2,500 from 7,500 requires 33.33% to return to 10,000 USD.

D16 - A 25% loss needs a 33.33% recovery

Recovery percentage is measured from the remaining capital, with no deposits, withdrawals or forecast of attainable return.

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One lot splits into two half-lot exits. The first half at plus 20 pips earns 100 USD; the second at plus 40 pips earns 200 USD. Their 300 USD gross total minus one 7 USD commission equals 293 USD net.

D17 - Weight every partial exit by its volume

Each exit applies to half the original position. The stated 7 USD is the total round-trip charge, deducted once.

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A reference bar of 200 USD is one initial R. A net-result bar of 293 USD is 1.465 times as long. Net R equals 293 USD divided by the original 200 USD price-move risk, giving 1.465R.

D18 - Keep the initial definition of R fixed

Here 1R is defined before commission. Keep that stated denominator fixed when expressing the completed partial-exit result.

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A 10 by 10 grid represents 100 training variations, with one selected at plus 0.40R mean. A separate held-out bar chart shows plus 1, minus 1, minus 1, plus 0.5 and minus 1R. Their total minus 1.5R divided by five gives an observed minus 0.30R mean.

D19 - Selected training is not untouched evaluation

Training selection and the descriptive mean of five invented held-out outcomes are separate statistics; neither establishes future expectancy.

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A four-step learning cycle: decide which measure and units apply; calculate the specified result; inspect its consequence; explain the assumptions and limits. An arrow returns from explanation to decision for another practice case.

D20 - Decision → calculation → consequence → explanation

The cycle checks understanding of a worked example. It does not establish readiness to trade real money.

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