# Case: size three trades > Nora has three trade ideas and one 10,000-dollar practice account: work out the size, the risk and the real cost of each, the cap that binds and what a gap could do. - Course: [Trading Basics: How It Works, How Not to Lose Everything](https://productovi.com/courses/trading.md) - Module: How much can I lose on one trade? - Lesson 12/32, ~39 min - Source: https://productovi.com/courses/trading/size-three-trades ## Three ideas, one account **Alex Tutor:** Back on your Pebble practice account, Nora wants a second opinion before tapping "Buy" three times. Her account is 10,000 dollars. **Nora:** Three ideas: Northwind Foods, Harbor 20 and Spark Coin. My plan was 3,000 dollars in each. Even split, nice and fair. **Alex Tutor:** Fair in dollars invested, not in dollars at risk. Here are her ideas with the stop where each idea is wrong and the round-trip costs per unit. ![Nora holds one of three equal baskets of pebbles; another basket tips on top of a tall wobbly stack of stones with a blue pebble, Alex points at it and Marc holds a notepad.](https://productovi.com/courses/trading/diagrams/m3-l4-scene.png) **Dataset (CSV):** [Nora's three ideas](https://productovi.com/datasets/trading/size-three-trades/m3_nora_ideas.csv) Entry, stop and costs per unit for each idea, and any event to watch. - `cost_per_unit`: Spread and commission for the round trip, per unit - `event`: report before next open: results come out before the next open; trades around the clock: no closing time **Marc:** Her rules, written down yesterday: 1% risk per trade, costs included, and no single position worth more than 40% of the account. That's 100 dollars of risk and 4,000 of value at most. > **Nora's written rules** > > - Risk at most **1%** of the account per trade, costs included: 100 dollars on 10,000. > - No single position worth more than **40%** of the account: 4,000 dollars at most. > - Round sizes down to whole units. **Sofia:** So for each idea: risk per unit, units by risk, then the 4,000 cap, and take the smaller. **Alex Tutor:** Put that routine in order first, so all three ideas go through the same steps. > **Exercise:** Put the sizing steps for each of Nora's ideas in sequence. **Alex Tutor:** Good. And write each number down before you look at the chart again. Charts have a way of making every idea feel bigger than its stop. > **Exercise:** Spark Coin: entry 2.40, stop 2.04, costs 0.06 a coin. With 100 dollars of risk, how many whole coins can Nora buy? Check the 4,000 cap too. **Nora:** Only 571 dollars in Spark? I wanted 3,000! It's the idea I'm most excited about. **Marc:** Excitement isn't in the formula. The coin's stop is 15% away because it swings wildly, so fewer coins carry the same 100 dollars of risk. **Alex Tutor:** Work out what your 3,000 would have risked. The stop is 15% away and the spread is wide. **Marc:** 3,000 / 2.40 is 1,250 coins. > **Exercise:** Nora's first plan: 1,250 Spark Coins (3,000 dollars), stop 2.04, costs 0.06 a coin. If the stop fills, how many dollars does she lose? ## The fund and the report **Sofia:** Harbor 20: 112.00 − 111.20 + 0.04 = 0.84 a share. 100 / 0.84 = 119 shares. **Alex Tutor:** And 119 × 112.00? **Nora:** 13,328. More than the whole account. > **Exercise:** Harbor 20 gives 119 shares by risk, worth 13,328. What size fits Nora's rules? **Marc:** And 29.40 instead of 100 is fine. There's no prize for using the full 1% on every trade. **Marc:** Northwind is the normal one: 1.55 a share, 64 shares, 3,072 of value, 99.20 at risk. But look at the event column. **Sofia:** And the costs: 64 × 0.05 = 3.20 on Northwind, but 238 × 0.06 = 14.28 on a coin position worth only 571. **Alex Tutor:** Put the coin's costs next to its value to see how expensive it is to trade. > **Exercise:** Nora's 238 Spark Coins are worth 571.20, and the round trip costs 0.06 a coin. What are the costs as a share of the position's value, in percent? **Alex Tutor:** Right: per dollar, the coin is by far the most expensive to trade. Now Northwind's event: results before the next open. If the price gaps 5% below the entry, to 45.60, the stop sells there: 64 × (48.00 − 45.60 + 0.05) = 156.80, not 99.20. **Alex Tutor:** Now a worse morning: work out the same thing for a bigger gap. > **Exercise:** Nora holds 64 Northwind shares bought at 48.00, stop 46.50, costs 0.05 a share. After the report the price opens 8% below her entry, at 44.16, and the stop sells there. What is her loss, in dollars? > **Exercise:** If each of Nora's three trades risks at most 1%, all three together can lose at most 1% of the account. **Marc:** That's why I keep a second rule: all open trades together may risk at most 3% of the account. Nora's three would be 2.29%, inside it, before any gap. **Nora:** So "1% per trade" can still mean more than 1% on a bad day. **Alex Tutor:** Test Marc's second rule: what if Nora adds a fourth idea that risks a full 100? > **Exercise:** Nora's three open trades risk 228.56 together on her 10,000 account. She adds a fourth trade risking 100. What share of the account is now at risk if all four stops fill, in percent, to two decimals? **Alex Tutor:** Yes, and that's worth knowing before the bad day, not during it. Let's hear the Northwind part in your words first. **Marc:** The report is the part people forget. > **Exercise:** Nora wonders: "My Northwind stop is set, so my loss is 99.20 at most, right?" In 2–3 sentences, answer her with numbers and say one thing she could do about it. **Alex Tutor:** Remember the pair: the stop is your plan for an ordinary day, and the size is your plan for a bad one. You need both before any order goes in. **Alex Tutor:** Now the module's case: put all three together the way Nora's journal should show them before any order goes in. **Nora:** Numbers first, opinions later. I can live with that. **Sofia:** One line per idea, then the totals. > **Exercise:** Size Nora's three trades and write her a short note. > **Educational, not advice** > > This lesson is educational, not advice. Most people who trade lose money, and you can lose all of it. Stops are not guarantees, and coins can jump at any hour. For taxes and rules, check with a licensed professional where you live. - Previous lesson: [Position size from risk and stop](https://productovi.com/courses/trading/position-size.md) - Next lesson: [Win rate and reward-to-risk](https://productovi.com/courses/trading/win-rate-and-payoff.md) --- Productovi Learning. Free, no sign-up needed to read.