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Discipline: the rules you do not break

Risk and the mind: how accounts survive3 min read
What you learn in 3 minutesThis lesson is about the word discipline as it is used on a trading platform: a written routine you follow before, during and after each session. It is the part of trading that is the same every day, and it is what keeps a small account alive when a single trade goes wrong. In money terms, a routine is the difference between losing A$20 on a bad trade and losing A$200 because you moved your stop.
BeforeDuringAfter5 · 5 · 5
A schematic diagram of a five-step pre-trade checklist, with each step shown as a box the reader ticks before placing an order.

Session boundaries in clock time

A routine needs a start and a finish. Before the platform opens, you set two times: the time you will look at charts and the time you will stop. On an Australian clock, that might be 7:00 am to 9:00 am, before work, or 6:00 pm to 8:00 pm, after dinner. The times are written beside the checklist, not remembered. If your session has no end time, it will stretch until a loss or a win decides it for you.

During the session, the clock is the only rule that does not depend on the market. A stop order can be moved, a target can be adjusted, but the end time is fixed by you. When the time arrives, you close the platform whether the day is green or red. This is not a judgement on the trades. It is a boundary that keeps one session from becoming the whole evening.

After the session, you write the stop time you actually used. If it was later than planned, you note the reason in one line. Over a month, those lines show whether your routine is holding or slipping. The clock does not promise a result. It only limits how long your money is exposed to the market on any one day.

Position size from the risk figure

The checklist gives a risk figure in Australian dollars. The platform gives a position size in lots. The two are connected by pip value, and you work out the size before you place the order. Suppose the checklist says risk A$20 and the stop is 25 pips. You need the A$ value of one pip on the size you are considering. On 0.10 standard lots of AUD/USD, one pip is 1 unit of the quote currency, which converts to a small number of Australian dollars at the current rate.

If the converted pip value is A$0.80, then 25 pips x A$0.80 = A$20. That size fits the checklist. If the converted pip value is A$1.60, the same 25 pips would risk A$40, which is double the rule. You then halve the position size, not the stop. The stop stays where the chart says it belongs; the size changes to match the A$ figure you already wrote down.

Your broker may round the position size to the nearest allowed step, charge a spread on entry and exit, and quote a different conversion rate. Because of this, the final A$ risk can vary between brokers and between sessions. The routine is to recalculate the size each time, not to reuse last week's number. A size that fitted A$20 last month may not fit it today.

Written record after the close

When the session ends, you write three lines: the time you stopped, the A$ risk you took, and whether the stop stayed where you placed it. These lines take two minutes. They are not a diary of feelings. They are a record of whether the routine was followed, which is the only part you control.

The record shows patterns that memory hides. If the stop moved on three of five trades, the checklist is not working yet. If the risk figure was A$20 on paper but A$35 in the account, the position size calculation needs another look. The numbers are small and dull, which is why they are useful. A dull record is harder to argue with than a memory of a good day.

After a week, you read the lines once. You do not change the checklist because of one loss. You change it only if the same line is missing twice. This keeps the routine stable long enough to be tested. The record does not predict the next trade. It tells you whether the last ones followed the rules you wrote.

A five-point checklist before one AUD/USD trade

StepAmountNote
1. Direction and reasonAUD/USD near 0.6640The price you see on the chart before you do anything else.
2. Entry, stop and target in pipsStop 20 pips, target 40 pipsYour own numbers, written down before the order is placed.
3. Position size from the stop0.10 standard lotsOne pip on 0.10 standard lots of AUD/USD is 1 unit of the quote currency, so 20 pips is about A$20 at the current rate.
4. Risk in A$A$2020 pips x 1 unit per pip, converted to Australian dollars at the rate your broker quotes.
5. Session end timeOne hourA fixed time to stop, whether the trade is open or closed.

Your broker may round the position size, charge a spread on entry and exit, and quote a different conversion rate, so the final A$ risk can vary between brokers.

Doing it once, step by step

You are about to write and follow a five-point routine for one AUD/USD session, using the risk figure and the clock as fixed points. Do the steps in order, once, before you place any order.

  1. 01

    Write the five points

    Before you open the platform, write five lines on paper: session start time, session end time, risk in A$, stop distance in pips, and position size in lots. Leave the position size blank until you calculate it. If any line is missing, you do not place a trade that session.

  2. 02

    Set the risk figure in A$

    Choose a risk figure that you are willing to lose on one trade, such as A$20. Write it beside the checklist. This figure does not change during the session. If you feel the urge to raise it, you close the platform instead.

  3. 03

    Calculate the position size

    Find the A$ value of one pip on the size you are considering, using the current AUD/USD rate. Divide the risk figure by that pip value to get the number of pips you can afford. Then match the stop distance to that number by adjusting the position size, not the stop.

  4. 04

    Place the stop before the order

    Enter the stop distance in the order ticket before you click buy or sell. The stop is part of the order, not a later decision. If the platform will not accept the stop at that distance, you do not place the trade.

  5. 05

    Stop at the written time

    When the session end time arrives, close the platform. Do not wait for one more candle. The end time is the one rule that does not depend on the market, so it is the easiest to keep.

  6. 06

    Write the three lines

    After the close, write the stop time you used, the A$ risk you took, and whether the stop moved. Read the lines at the end of the week. Change the checklist only if the same line is missing twice.

The mistake most people make here

The common mistake is to treat the checklist as a mood rather than a written list. People decide they feel ready, place the order, and only then work out where the stop goes. Instead, write the five points down before you open the platform, and if any point is missing, do not place the trade. The checklist is not a prediction and it does not promise a result; it only fixes what you are willing to lose.

Check yourself

You plan a stop of 25 pips on 0.10 standard lots of AUD/USD. One pip on 0.10 lots is 1 unit of the quote currency. What is the risk in units of the quote currency?

25 pips x 1 unit per pip = 25 units of the quote currency. Converted to Australian dollars at the current rate, that is the A$ figure you write on the checklist.

Your checklist says risk A$20 and your stop is 20 pips. If you move the stop to 40 pips without changing the position size, what happens to the risk in A$?

The risk doubles to about A$40, because 40 pips x 1 unit per pip = 40 units of the quote currency. The checklist rule is to keep the A$ risk fixed, so you would reduce the position size instead.

Questions that come up next

How do I set a session end time that I will actually keep?

Choose a time that fits your day and write it beside the checklist before you open the platform. Set an alarm on your phone for that time, not on the trading platform. When it rings, close the platform even if a trade is open. The end time is the one rule the market cannot change.

What if the market is moving fast and I want to stay longer?

A fast market is exactly when the end time matters most. The extra time increases the chance of a decision made from excitement. If you stay longer, you are trading without a boundary. Write the reason in your record the next day and see if it repeats.

How do I work out the position size when my checklist gives a risk in Australian dollars?

You need the A$ value of one pip for the size you are considering. Multiply that by the number of pips in your stop. If the result is more than your checklist figure, reduce the position size until it matches. The stop stays where the chart says it belongs.

Why does my A$ risk differ from what I calculated?

Your broker may round the position size to the nearest allowed step. They may also charge a spread on entry and exit, and quote a different conversion rate. Because of this, the final A$ risk can vary between brokers and between sessions. Recalculate each time rather than reusing an old number.

What should I write in the record after the close?

Write the stop time you actually used and one line on whether it matched your plan. If it did not, note the reason. Over a month, those lines show whether your routine is holding or slipping. The record is not a diary of wins and losses.

Can I use the same checklist for every trade?

The five points stay the same, but the numbers in them change. The risk figure in Australian dollars may be the same, but the stop distance in pips and the position size are recalculated for each trade. A checklist is a routine, not a fixed order.

The words used on this page

discipline
A written routine you follow before, during and after each session. It is the part of trading that is the same every day. It keeps a small account alive when a single trade goes wrong.
checklist
A written list of five points you complete before you open the platform. If any point is missing, you do not place the trade. It fixes what you are willing to lose.
pip
A small unit of price movement in a currency pair. On 0.10 standard lots of AUD/USD, one pip is 1 unit of the quote currency. That converts to a small number of Australian dollars at the current rate.
position size
The number of lots you trade. It is connected to your risk figure by pip value. You work out the size before you place the order.
stop
An order that closes a trade at a chosen price to limit loss. It stays where the chart says it belongs. If you want to risk less, you reduce the position size, not move the stop.
session
The period you look at charts and trade. It has a start time and an end time written beside the checklist. The end time is fixed by you, not by the market.

What to take away

  • A routine is a written list, not a feeling, and it is the same every day.
  • The session end time is the one rule the market cannot change.
  • Position size is recalculated from the A$ risk figure each time, not reused.
  • Write the stop time you actually used, and one line on whether it matched the plan.
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Trading forex and CFDs carries a high risk of losing money. Most retail accounts lose. Nothing here is a recommendation to trade or a forecast of any result.Kateyour course guide