Trading rules: how to write ones you can check (with a template)
By the Trading Journal team · Updated · 6 min read
What makes a rule a rule
«Be disciplined» and «don’t overtrade» are wishes. A rule passes three tests:
- Checkable. After the trade you can answer yes or no without arguing with yourself.
- Decided before the trade. It tells you what to do, not how to explain it afterwards.
- A number or a list, where it can be: an amount, a count, a time, a named setup.
| Wish | Rule |
|---|---|
| Manage risk | Risk at most 1 % of the balance per trade, set by the stop before entry |
| Don’t overtrade | At most 4 trades a day |
| Don’t chase losses | After a losing trade, no new entry for 15 minutes |
| Trade only good setups | Only setups from my list: pullback, London breakout |
| Protect the account | Stop for the day at −2 % |
Three kinds of rules
Risk rules — how much
- Maximum loss per trade, in money or % of the balance.
- Daily loss limit: the day ends when it is hit.
- Maximum size: a ceiling in lots, whatever the setup.
- Maximum open risk across all positions at once.
On a prop-firm account, set your own limits inside the firm’s: if the firm stops you at −5 % a day, your own daily stop at −2 or −3 % keeps one bad morning from ending the challenge. How firms count the daily limit: FTMO daily loss limit, with examples; the prop firm calculator shows the room you have left today.
Process rules — when and how you enter
- Only setups from your list, each named the same way every time.
- The stop is in the platform before or at entry, never «in your head».
- No entries in the minutes around news you have chosen to avoid.
- Trading hours: only the session you have a plan for.
Stop rules — when the day is over
- After the daily loss limit.
- After a number of losses in a row, say two.
- After a set number of trades.
- After a pause rule is broken — the clearest sign that the day has turned into revenge trading.
A template you can copy
Fill in the numbers; delete what you do not use. Five to eight rules is plenty.
| # | Rule | Your number |
|---|---|---|
| 1 | Max loss per trade | … % or $ … |
| 2 | Daily loss limit — stop trading for the day | … % or $ … |
| 3 | Max trades per day | … |
| 4 | Max size | … lots |
| 5 | Only these setups | … |
| 6 | Stop placed at entry | yes |
| 7 | Pause after a losing trade | … minutes |
| 8 | Stop after losses in a row | … |
Check that you follow them
Rules you never check drift. The check is one column:
- After each trade, mark «rules kept»: yes or no. Any rule broken makes it a no.
- Once a week, compare the two groups: total, average per trade and number of trades.
- Find the rule that is broken most often and the one whose breaks cost most. Start with that one.
An example month:
| Trades | Result | Average per trade | |
|---|---|---|---|
| Rules kept | 64 | +$2,140 | +$33.44 |
| Rules broken | 18 | −$1,020 | −$56.67 |
| The month | 82 | +$1,120 |
Eighteen trades decided whether this was a good month. Without the column, both groups blur into one +$1,120 and nothing points to what to fix.
Before you trust the comparison: with fewer than 15 trades in a group, one trade can swing the average. Look at the month, not the day.
Rules that are not working
- Broken all the time — the rule may be unrealistic, or the real problem is elsewhere: you cannot keep a 4-trade cap while taking setups that are not on your list. Fix the cause, then the cap.
- Kept, but the kept trades still lose — the rules are fine; the edge is not. Look at results by setup and hour.
- Never broken and costing nothing — fine, but not where the money is. Spend your attention on the rule that is.
Where to track it
The free trading journal template has a «Rules kept» column and a summary that shows your result when you kept your rules and when you broke them. In our journal, risk rules on the account — daily loss, max loss per trade, max trades a day, max size, max drawdown — are checked on every trade automatically, and the report compares kept and broken rules in money. The journal reads your account; it cannot block a trade.
This guide is part of How to keep an MT4/MT5 trading journal.