Five 40-minute lesson plans

Each exercise appears in one lesson. Timing is a plan to adapt to your learners, not an observed learning outcome.

L01 / 40 minutes

From a risk budget to an account check

Learning objectives

Convert pip value into the account currency before calculating position size.
Round volume down to the supplied lot step and verify the planned loss.
Keep position margin, free margin and planned stop-loss risk as separate quantities.

Exercises: E01, E06
Diagrams: D02, D03, D04, D13, D14

Materials

Exercise E01 and E06 sheets with separate worked solutions.
Diagrams D02-D04 and D13-D14; paper or a blank calculation sheet.
Decision Lab and the pip, position-size and margin calculators; printed worked examples provide an alternative.
Use the exercises' fixed conversion rates and contract assumptions for marking. Calculator defaults or current rates may differ.

Lesson sequence

4 min - Name the quantities
Ask learners to label a risk budget, pip value, lot size, margin and free margin with their units. Collect a first answer before discussing it.
5 min - Trace the currency conversion
Use D02-D04 to trace contract units to quote-currency pip value and then account-currency pip value. Ask where the familiar 10-per-pip shortcut would fail in E01.
10 min - Exercise E01: size the yen position
Learners calculate independently, show the units and round down to the stated lot step. They then check the jpy-position case in Decision Lab and explain any correction. Enter the exercise assumptions explicitly when using a calculator.
5 min - Separate collateral from a loss budget
Use D13-D14 to distinguish existing used margin, the new margin requirement, remaining free margin and the separate stop-loss budget. Available margin is not a recommendation to open a position.
10 min - Exercise E06: check the account
Learners calculate the new notional, margin requirement and post-position free margin before checking the margin-risk case. Compare these with the separately calculated planned price-move loss.
6 min - Explain and check
Pairs identify one unit error and one margin-versus-risk error the examples prevent. Finish with the individual check questions; record the explanation as well as the number.

Check understanding

In E01, what lot size respects the 100 EUR budget, and why is 0.67 lots too large?
0.66 lots. Pip value is 6 EUR per pip per lot; 0.66 x 25 x 6 = 99 EUR of planned price-move risk. At 0.67 lots the model gives 100.50 EUR, above the budget.

In E06, what is free margin after the new position, and is it the planned loss at the stop?
Free margin is approximately 2,166.67 USD: 5,000 minus 1,000 minus 55,000/30. The separate planned price-move loss is 100 USD. They measure different things.

Inputs are synthetic and fixed. E01 excludes execution costs; E06 uses a simple leverage model without tiers or offsets. Planned stop-loss loss and free margin do not bound an actual trade's loss. Neither calculation establishes a safe risk percentage or broker-specific account rules.

L02 / 40 minutes

Execution costs and the price of a fill

Learning objectives

Label results as gross or net and deduct an additional cost exactly once.
Express the supplied pip cost in units of the stated initial risk, R.
Calculate a realised loss from a supplied fill distance instead of assuming execution at the planned stop.

Exercises: E02, E07
Diagrams: D05, D06, D15

Materials

Exercise E02 and E07 sheets with gross/net labels and separate worked solutions.
Diagrams D05-D06 and D15; paper for a cost reconciliation.
Decision Lab, trading-cost analyzer, expectancy calculator and profit/loss calculator, or printed calculations.
Use only the supplied additional costs. E07's closing distance already represents the supplied adverse fill.

Lesson sequence

4 min - Read the labels first
Present E02's gross results and ask whether a cost has already been included. Each learner states what 1R means before calculating.
6 min - Build one gross-to-net bridge
Use D05-D06 to separate gross expectancy, additional cost in R and net expectancy. Mark where a second deduction would count the same cost twice.
10 min - Exercise E02: does the stated edge survive?
Learners calculate gross expectancy, convert the 1.5-pip additional cost into R and derive net expectancy. Check the execution-costs case, then compare with the expectancy calculator using the same assumptions.
5 min - Compare a stop instruction with a fill
Use D15 to distinguish E07's planned 20-pip stop from its supplied 35-pip adverse closing distance. Ask what evidence would be needed to analyse a real execution rather than this supplied example.
9 min - Exercise E07: reconcile the loss
Learners calculate price-move loss and round-trip commission separately, then add them once. Check the gap-execution case and reproduce it in the profit/loss calculator where the supplied assumptions can be entered.
6 min - Exit check
Learners explain one omission and one double-counting error. Use the check questions independently; require a gross/net label or cost label on each answer.

Check understanding

In E02, what are gross expectancy, additional cost in R and net expectancy?
Gross expectancy is 0.45 x 1.8 minus 0.55 x 1 = +0.26R. Additional cost is 1.5/5 = 0.30R per trade. Net expectancy is -0.04R per trade under the stated assumptions.

What loss does E07 produce, and why is another 15-pip slippage charge inappropriate?
35 x 0.50 x 10 = 175 USD price-move loss, plus 0.50 x 7 = 3.50 USD commission: 178.50 USD total. The 35-pip closing distance already includes the supplied adverse fill; charging the extra distance again counts it twice.

These are synthetic examples, not measured execution quality or a future cost distribution. The gross-to-net example holds win rate and payoffs fixed. Changing a stop can change a strategy's outcomes; the cost ratio alone cannot select a better stop. Actual order handling depends on product, order terms and broker.

L03 / 40 minutes

Read the whole position: exposure and partial exits

Learning objectives

Represent a supplied FX position with signed base- and quote-currency legs.
Distinguish shared currency exposure from summed planned stop-loss budgets.
Weight partial exits by volume and reconcile one full-trade net result in the original R units.

Exercises: E03, E09
Diagrams: D07, D08, D17, D18

Materials

Exercise E03 and E09 sheets with separate worked solutions.
Diagrams D07-D08 and D17-D18; a blank table for currency legs or partial exits.
Decision Lab, portfolio-exposure tool and profit/loss calculator, or printed calculations.
Keep the original full-trade risk definition visible throughout E09 and allocate its total commission only once.

Lesson sequence

4 min - State the unit and scope
Ask what a pair name hides about its two currency legs and what a partial exit hides about the remaining position. Learners label exposure, cash P&L and R as different measures.
6 min - Build a currency-leg table
Use D07-D08 to represent the three supplied long base/USD positions. Keep exposure units separate from the stated 100 USD stop-loss budget for each position.
10 min - Exercise E03: find the common leg
Learners calculate and sum the negative USD legs, then separately sum planned stop-loss budgets. Check the usd-concentration case and inspect the same synthetic positions with the portfolio-exposure tool.
5 min - Keep one full-trade denominator
Use D17-D18 to draw the two exit volumes against the original 1.00-lot position. Keep the initial price-move risk of 200 USD as the stated denominator of R.
9 min - Exercise E09: combine the partial exits
Learners calculate each partial's gross cash result, add them, deduct the single full-trade commission and convert the total to R. Check the partial-exit case. If calculating each leg separately, reconcile costs across the whole trade rather than charging the full commission to each exit.
6 min - Reconcile and explain
Pairs review units, signs, volume weights and cost allocation. Finish with individual answers to the check questions.

Check understanding

In E03, what are the net USD leg and summed planned stop-loss budgets? Does either describe a guaranteed maximum loss?
The net USD quote leg is -30,000 USD; the separate planned stop-loss budgets sum to 300 USD. Exposure differs from planned loss. Neither establishes a guaranteed maximum loss or independent outcomes.

In E09, what is the combined net outcome in cash and R?
The partial gross results are 100 USD and 200 USD. Deduct the total 7 USD round-trip commission once: net P&L is 293 USD. Against the stated initial risk of 200 USD, the result is 1.465R.

Prices, volumes and outcomes are synthetic. A shared currency leg does not establish a correlation estimate or identical price behaviour. The exposure representation does not imply literal currency borrowing. The partial-exit calculation evaluates the supplied exits; it does not show that partial exits improve a strategy.

L04 / 40 minutes

Drawdown: the path and the recovery denominator

Learning objectives

Track a running equity peak and calculate subsequent percentage drawdown from that peak.
Explain why the same supplied outcomes can have the same final equity and different drawdown paths.
Calculate the gain needed to restore a starting amount after a loss, using remaining capital as the denominator.

Exercises: E04, E08
Diagrams: D09, D10, D16

Materials

Exercise E04 and E08 sheets with separate worked solutions.
Diagrams D09-D10 and D16; a blank table with trade, equity, running peak and drawdown columns.
Decision Lab, drawdown calculator and an educator-led strategy-resilience demonstration, or printed paths.
Make the exercise's synthetic 10% risk fraction visible as an arithmetic assumption, never as a suggested risk level.

Lesson sequence

4 min - Predict before calculating
Show E04's two sequences. Learners predict whether final equity and maximum drawdown must be identical, recording the predictions separately.
6 min - Introduce the running peak
Use D09-D10 to demonstrate one row of the equity table and identify the drawdown denominator. Explain that profit relative to initial capital can coexist with a drawdown from a later peak.
10 min - Exercise E04: calculate the path
Learners complete sequence A's table and find maximum drawdown. Compare its path with sequence B before checking the backtest-sequence case. Discuss what conditional resampling can illustrate and what fresh evidence it cannot create.
5 min - Change the recovery denominator
Use D16 to distinguish a loss measured against starting capital from a gain measured against remaining capital. Learners identify the two denominators before applying a formula.
9 min - Exercise E08: restore the starting amount
Learners calculate the gain required after the supplied 25% loss, then verify it in the drawdown-recovery case and drawdown calculator. Explain why the arithmetic says nothing about how quickly that gain could be earned.
6 min - Individual exit check
Use the check questions. Each learner gives one reason a reassuring final return is an incomplete description of the path. Do not turn the example into a recommended position-risk setting.

Check understanding

In E04 sequence A, which peak and later trough determine maximum drawdown, and what is the result?
The running peak is 13,310 USD and the subsequent trough is 10,781.10 USD. Maximum drawdown is (13,310 - 10,781.10)/13,310 = 19%. Measuring only from the starting 10,000 USD misses this drawdown.

What gain restores the starting amount after E08's 25% loss, with no cash flows?
The account retains 75% of the starting amount. Recovery requires 25/75 = 33.333...% of remaining capital, approximately 33.33%, rather than 25%. This is required-return arithmetic, not a forecast.

Paths and recovery inputs are synthetic, with no cash flows or execution variation. The 10% risk fraction makes the arithmetic visible; it is not a safe or recommended threshold. Resampling is conditional on its observations and model. It does not establish future drawdown, ruin probability or the attainability of a recovery return.

L05 / 40 minutes

Evidence before conclusions: journals and holdout tests

Learning objectives

Select unique completed trades with valid realised net outcomes before calculating a journal statistic.
Keep planned targets separate from realised results and document an explicitly known duplicate.
Distinguish a selected training result from a frozen-rule holdout result and state the limits of a five-trade sample.

Exercises: E05, E10
Diagrams: D11, D12, D19, D20

Materials

Exercise E05 and E10 sheets with separate worked solutions.
Diagrams D11-D12, D19 and D20; a table for include/exclude decisions and reasons.
Decision Lab, journal analyzer and strategy testing protocol, or printed records and protocol questions.
If demonstrating an import, use an educator-prepared synthetic file in the tool's supported format. No learner account history is required.

Lesson sequence

4 min - Define the sample
Ask whether five rows necessarily mean five completed trades. Learners write an inclusion rule before inspecting the E05 records.
6 min - Audit the records
Use D11-D12 to separate plans, completed outcomes and the explicitly known accidental duplicate. Require a reason for each inclusion or exclusion; do not remove an inconvenient losing trade.
9 min - Exercise E05: compute a defensible mean
Learners select unique completed trades, report sample size and calculate mean realised net R. Check the journal-quality case. If demonstrating the journal analyzer, first reconcile the file with the worksheet and stated inclusion rule.
6 min - Separate selection from evaluation
Use D19 to distinguish searching 100 training variations from evaluating one version frozen before the holdout observations. Ask what happens to the test's role if rules change after its results are seen.
9 min - Exercise E10: report the unseen result
Learners calculate the holdout mean without adding the training result or deducting already-included costs. Check the out-of-sample case. With D20 and the strategy testing protocol, draft a record of the frozen version, sample boundary and next evaluation step.
6 min - Write a limited conclusion
Use the check questions. Each learner writes one sentence reporting the result and sample size, followed by one sentence describing what those observations cannot establish.

Check understanding

In E05, which records enter the mean, and what are the sample size and mean realised net R?
Include A-01, B-02 once, and D-04. Exclude the explicitly known accidental duplicate and planned target C-03. There are three unique completed trades; total is +2R and mean is 2/3R, approximately +0.667R per trade.

What does E10's five-trade holdout report, and what can it establish about the selected +0.40R training mean?
The holdout total is -1.5R and observed mean is -0.30R per trade. The +0.40R training mean is a separate selected statistic. Five observations do not validate a stable edge, prove permanent failure or forecast future performance. Retuning after seeing them requires a new evaluation boundary.

Records and strategy results are invented teaching data. The duplicate is known to be accidental; real records need an audit trail rather than deletion based only on a repeated-looking row. Three or five observations are descriptive examples, not evidence of stable performance. This lesson assesses record handling and reasoning, not profitability or readiness to risk money.