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How do risk budget and position value relate?

Educational calculation without signup: hypothetical capital, risk fraction and exit distance.

DAO / DECISION OBJECT / 001SAMPLE · educational example

Depth of the same educational example

01 / DOCalculate02 / LEARNUnderstand03 / VERIFYInspect

One example. Three levels of understanding.

Risk budget5units

Simplified position value250units

Educational arithmetic. Not a realized loss or a recommendation to trade.

Change one number. See what changes.

Hypothetical capital (units)Chosen risk fraction (%)Exit distance (%)

Compare exit distance:

.Growth_objectFields__5Gtjb,.Growth_presetRow__MFGCU,.Growth_distanceSlider__KUMnx{display:none}Without JavaScript this is a fixed example: 1,000 × 0.5% = 5; 5 / 2% = 250. DO / LEARN / VERIFY depth controls and links still work.

Position value and money at risk are different numbers.

01
Define a hypothetical budget
Capital × risk fraction / 100
02
Relate the budget to exit distance
Budget / (distance / 100)

At the same budget, a wider distance gives a smaller calculated position value. This follows from the formula; it does not evaluate the trade.

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A calculation has a method. A method has boundaries.

Source: DAO educational arithmetic
Coverage: Linear position model
Data date: No market data used
Privacy: Values stay in this tab
Review: Educational draft; not a study

DAO verification standard ↗

Calculation assumptions and limitations

Hypothetical inputs are not recommended settings. Fees, slippage, gaps, contract size and liquidation are omitted. An exit order does not guarantee a fill price. Realized loss may differ from this calculation.

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