Trading Rules: How to Write Rules You Can Actually Follow
Trading rules are written if-then statements you set before trading, saying exactly what you will do in each situation, such as how much to risk or when to stop. Each rule is specific enough that afterwards you can say whether you followed it or broke it.
Module 10 · Lesson 5 of 5
What you'll learn
- What trading rules are and why they are written down before you trade.
- The six kinds of rule most traders cover, from risk to review.
- How to turn a vague intention into a specific, checkable rule.
- How rules differ from a checklist and from a trading plan.
This is the last lesson of the Trade Management module.
What are trading rules?
Trading rules are written if-then statements, set before you trade, that tell you exactly what to do in a given situation. "If my loss today reaches $60, then I stop trading until tomorrow" is a rule. You can check it afterwards: either you stopped, or you did not. A rule that cannot be checked is only a good intention.
Rules are decided calmly, before money is at stake, so fear and hope mid-trade have nothing to change.
Definitions
- If-then rule: a condition ("if X") and the action it triggers ("then Y"), with no "usually" or "try to".
- Risk per trade: the money you accept losing if your stop loss is hit.
- Daily loss limit: the total loss in one day after which you stop opening trades.
- Open risk: the total risk on all positions open at once.
What kinds of trading rules are there?
Most sets of trading rules cover six areas: risk, market and time, entry, exit, behaviour, and review. Each area answers one question you would otherwise answer under pressure. The numbers below are placeholders to show the format; you fill in your own.
| Area | The question it answers | Example format (your numbers) |
|---|---|---|
| Risk | How much can I lose? | Risk per trade at most [X]%; stop for the day at [Y]% lost; open risk at most [Z]% |
| Market and time | What and when do I trade? | Only [instruments I have studied]; if outside [my sessions], or a listed release is due within [N] minutes, then no new trade |
| Entry | What must be true to enter? | If [condition A] and [condition B] on [timeframe], then I may enter |
| Exit | When do I get out? | Stop loss, take profit, or close if still open after [time] |
| Behaviour | What stops emotional trading? | At most [N] trades a day; stop after [N] losses in a row; never add to a losing trade |
| Review | When do rules change? | Review the journal every [day]; change rules only then |
For the entry row, write your conditions so anyone could check them on a chart. For the time rules, MetaTrader 5 shows each event's release time and priority on the Calendar tab of the Toolbox, explained in the economic calendar lesson.
How do you write trading rules?
You write a trading rule by naming one measurable condition, one visible action, and the number that links them, in an if-then sentence. Then test it: could someone else look at your trades and say whether you followed it? If not, rewrite it until they could.
- Write the intention: "don't lose too much in a day".
- Name the measurement: today's closed losses.
- Choose your number: say, 3% of the starting balance.
- Name the action: stop opening trades.
- Combine: "If today's closed losses reach 3% of my starting balance, then I stop until tomorrow."
| Vague (cannot be checked) | Specific (can be checked) |
|---|---|
| Don't risk too much. | If I open a trade, its stop loss risks no more than 1% of my balance at the start of the day. |
| Avoid trading on news. | If a high-priority release for either currency is due within 30 minutes, then I open no new trade. |
| Don't revenge trade. | If I lose three trades in a row, then I stop for the day. |
Risk rules start from position sizing, and every exit rule assumes a stop loss and take profit set when the trade opens.
How do trading rules work on a real day?
On a real day, trading rules work by being checked before every new trade against numbers already written down, and the first rule that fails ends the decision. Here is a synthetic rule set on a $2,000 demo account, with each limit converted into money.
| Rule | Limit | In money |
|---|---|---|
| Risk per trade | 1% of the balance at the start of the day | $20 |
| Daily loss limit | 3% of the balance at the start of the day | $60 |
| Maximum open risk | 2% of the balance at the start of the day | $40 |
Writing "at the start of the day" keeps the money figures fixed as the balance changes. The day goes like this:
- Trade 1 risks $20 and hits its stop loss. Losses today: $20.
- Trade 2 risks $20 and hits its stop loss. Losses today: $40.
- Trade 3 risks $20 and hits its stop loss. Losses today: $60.
The daily loss rule is now met: $60 is 3% of $2,000. No fourth trade today, however good the next idea looks.
The proposed fourth trade breaks another rule too. It has a 25-pip stop on EURUSD at 0.10 lot. A EURUSD pip is worth about $10 per standard lot, so 0.10 lot risks 25 × $1 = $25, above the $20 limit.
Recompute the size that fits: $20 ÷ (25 pips × $10 per pip per lot) = 0.08 lot, which risks 25 × $0.80 = $20. The position size calculator does this for any stop. The resized trade is still not allowed today: passing one rule never cancels another.
How do trading rules differ from a checklist and a plan?
Trading rules are your standing limits and conditions; a checklist is the quick test before each trade that those rules are met; a trading plan is the full document holding both, plus your markets and routine. They work together, and none replaces the others.
| Trading rules | Pre-trade checklist | Trading plan | |
|---|---|---|---|
| What it is | If-then statements | A yes or no list | A full written document |
| When you use it | Before and during trades | Just before each order | When you prepare and review |
| Example | If today's losses reach $60, then I stop | Is today's loss below my limit? Yes or no | Markets, schedule, rules, checklist, review routine |
The trading checklist before entering a trade is in the Beginner level; a full trading plan comes in a later module.
How do you keep and review your trading rules?
You keep trading rules in one dated document next to your trading journal, and review them on a fixed schedule, never during a trade. Give each version a number and a date, so you always know which rules a past trade was judged against.
At each review, mark every trade "followed" or "broke a rule", and name the rule. If one rule breaks often, ask whether it is unclear or unrealistic for you. Change it then, as a new version, and test it on demo. Keeping a trading journal is covered in Module 11.
Why do traders break their own trading rules?
Traders usually break their rules when a rule is vague, when a loss creates pressure to win it back, or when the rules are not in front of them while trading. The fix is rarely more willpower. It is clearer wording, fewer rules, and limits set before the order is sent.
- Keep the one-page rule list beside the screen, not in a folder.
- Set the stop loss in the order window when you open the trade, so it exists before emotions do.
What mistakes do traders make with trading rules?
The most common mistakes are vague wording, changing rules in the middle of a trade, and writing more rules than you can follow. Rules control your behaviour, not the market: a trade that follows every rule can still hit its stop loss, and that is a normal, planned outcome the risk rules already allow for.
- Vague rules. "Trade carefully" can be bent to mean anything.
- Changing rules mid-trade. Moving a stop further away turns a rule into a suggestion.
- Too many rules. A long list gets skipped; a short one gets followed.
- No room for slippage. A stop can fill past its level in a volatile market, so leave room for that inside the daily loss limit.
Try it on demo
Write five if-then rules on one page (risk per trade, daily loss limit, a time rule, an exit rule, a behaviour rule) with a version number and today's date. Trade a MetaTrader 5 demo account under them for a week, then mark each trade "followed" or "broke a rule".
Quick check
- What makes a trading rule a real rule rather than a preference?
- Which of these is a specific, checkable rule?
- A $2,000 demo account has a 3% daily loss limit. Three trades each lose $20. What does the rule say?
- A 25-pip stop at 0.10 lot on EURUSD risks $25. With a 1% rule on $2,000, the largest size is
- When should you change a trading rule?
Frequently asked questions
What are the golden rules of trading?
Most lists of golden rules of trading cover the same ground: limit risk per trade, set a daily loss limit, use a stop loss, trade only what you understand, avoid overtrading and keep a journal. The numbers are personal; each rule must be written and checkable.
How many trading rules should I have?
A short list you follow beats a long one you skip. Start with one rule per area and add more only when a review shows a need.
What is the 1% rule in trading?
The 1% rule limits the loss on any single trade to 1% of the account: $20 on $2,000. 1% is a widely used example; the percentage is yours to set.
Should I ever break my trading rules?
No. If a rule seems wrong, follow it, note it in your journal and change it at the next review. Breaking rules mid-trade means your results no longer show whether the rules work.
Sources
- MetaQuotes, MetaTrader 5 Help: Fundamental Analysis (accessed 27 October 2026): the Calendar tab of the Toolbox shows each event's release time and priority. https://www.metatrader5.com/en/terminal/help/charts_analysis/fundamental
Practise what you learned
Open an account to use MetaTrader 5. Start on a demo account before risking real money.
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