Position sizing under a hypothetical trading plan
Series X-A case study · set 3, case 6 of 9 · 5 questions · 1 mark each
Question 1 of 5Case practice
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The case · stays here for all 5 questions
A learner studies a fictional share that has broken above a previously observed ₹198 resistance area. The planned purchase price is ₹200, with a planned exit trigger at ₹190 and target ₹220. The learner’s maximum planned loss is ₹1,000 before costs. Whole shares may be traded. Volume on the breakout day is 3,000 shares versus a previous average of 1,000. In a separate adverse scenario, the market gaps and the exit executes at ₹185 instead of ₹190. The prices and stop mechanism are hypothetical. The exercise tests risk arithmetic. No technical signal or stop order is assumed to guarantee an execution price or profit.
All people, firms, prices and contract terms are fictional.
Ignore taxes and transaction costs unless the case explicitly includes them.
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The case and its answers
Every question of this case, with its answer and why each other option is wrong.
A learner studies a fictional share that has broken above a previously observed ₹198 resistance area. The planned purchase price is ₹200, with a planned exit trigger at ₹190 and target ₹220. The learner’s maximum planned loss is ₹1,000 before costs. Whole shares may be traded. Volume on the breakout day is 3,000 shares versus a previous average of 1,000. In a separate adverse scenario, the market gaps and the exit executes at ₹185 instead of ₹190. The prices and stop mechanism are hypothetical. The exercise tests risk arithmetic. No technical signal or stop order is assumed to guarantee an execution price or profit.
All people, firms, prices and contract terms are fictional.
Ignore taxes and transaction costs unless the case explicitly includes them.
Q1What is the planned loss per share from entry to the stated exit trigger?
Option A. ₹20
Why it is wrong: This is the planned upside to the target.
Option B. ₹15
Why it is wrong: This is the loss under the separate gap scenario.
Option C. ₹10 — Correct answer
Option D. ₹2
Why it is wrong: This measures distance from the old resistance area.
Answer: C. ₹200 − ₹190 = ₹10 per share. Remember: Position sizing begins with the planned loss per unit.
Hint, shown before you answer in practice mode: Subtract the trigger from the planned entry.
XA-S3-C06-Q1easynumerical
Q2How many shares fit a ₹1,000 planned-loss budget at that trigger?
Option A. 50 shares
Why it is wrong: This divides by the profit target distance instead of the planned loss.
Option B. 100 shares — Correct answer
Option C. 1,000 shares
Why it is wrong: This confuses rupees with share quantity.
Option D. 200 shares
Why it is wrong: This would risk ₹2,000 at the trigger.
Answer: B. ₹1,000 ÷ ₹10 = 100 shares. This controls planned, not guaranteed, loss. Remember: A risk budget and a price-based exit jointly determine position size.
Hint, shown before you answer in practice mode: Divide the loss budget by planned loss per share.
XA-S3-C06-Q2mediumnumerical
Q3What is the planned reward-to-risk ratio at the ₹220 target?
Option A. 2 to 1 — Correct answer
Option B. 20 to 1
Why it is wrong: This ignores the ₹10 risk per share.
Option C. 1 to 1
Why it is wrong: The target and stop distances are not equal.
Option D. 1 to 2
Why it is wrong: This reverses reward and risk.
Answer: A. Reward per share = ₹220 − ₹200 = ₹20. Planned risk = ₹10. Ratio = 20/10 = 2. Remember: A reward-to-risk ratio is not a win probability.
Hint, shown before you answer in practice mode: Compare target distance with trigger distance.
XA-S3-C06-Q3mediumnumerical
Q4If 100 shares exit at ₹185 after the gap, what is the actual loss before costs?
Option A. ₹15
Why it is wrong: This is loss on one share.
Option B. ₹1,000
Why it is wrong: This assumes execution at the planned trigger.
Option C. ₹500
Why it is wrong: This counts only the extra gap loss and omits the original planned loss.
Option D. ₹1,500 — Correct answer
Answer: D. 100 × (₹200 − ₹185) = ₹1,500. The gap caused loss beyond the planned budget. Remember: Stop triggers do not guarantee execution prices.
Hint, shown before you answer in practice mode: Use the actual exit price for realised loss.
XA-S3-C06-Q4mediumnumerical
Q5What does the day’s volume show, without overclaiming what it predicts?
Option A. Volume was one-third of its prior average.
Why it is wrong: The ratio is reversed.
Option B. Trading volume was three times the prior average, but this does not guarantee continuation. — Correct answer
Option C. The share is guaranteed to reach ₹220.
Why it is wrong: Volume does not make the price target certain.
Option D. The chance of a loss is zero.
Why it is wrong: The gap scenario itself shows loss remains possible.
Answer: B. 3,000/1,000 = 3 times average volume. It is supporting market information, not proof of a future price move. Remember: Technical observations require risk controls and uncertainty awareness.
Hint, shown before you answer in practice mode: Separate an observed ratio from a forecast.
XA-S3-C06-Q5mediumnumerical
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