Rule 1 — Risk a small, fixed fraction per trade
Decide the maximum percentage of your account you are willing to lose on a single idea before you enter, and never change it mid-trade. Learners commonly start at 0.5%–1% per trade on paper. The percentage matters less than the fact that it is fixed and pre-committed.
Position sizing, worked end to end
Illustrative example only: a $10,000 paper account, risking 1% ($100), with a stop 25 pips from entry. $100 ÷ 25 pips = $4 per pip, which on EUR/USD is roughly a 0.4 standard-lot position. Notice what the formula does: the stop distance decides the size — never your confidence, never your mood.
Rule 2 — A daily loss limit that ends the session
Set a maximum daily loss — commonly 2–3 times your per-trade risk — and when it is hit, you are done for the day. No exceptions, no "one more to win it back". On a paper account this rule feels silly. Practise it anyway: you are training the exact muscle that will protect a real account.
Rule 3 — Think in R, not in money
Measure every trade in units of its own risk (R). A trade that risked $100 and made $200 is +2R; one that lost its full stop is −1R. R-thinking lets you compare trades of different sizes honestly and keeps your journal focused on process instead of cash. Ten trades at an average of +0.3R is a healthier learning record than one lucky +5R surrounded by chaos.
Rule 4 — Respect the drawdown maths
Losses compound against you asymmetrically:
| Account drawdown | Gain needed just to get back to even |
|---|---|
| −10% | +11% |
| −25% | +33% |
| −50% | +100% |
| −75% | +300% |
This table is the entire argument for small position sizes. A string of ordinary losses at 1% risk is a bad week. The same string at 10% risk is a hole that maths makes nearly impossible to climb out of.
Rule 5 — No revenge trading, ever
The most expensive trade in retail forex is the one placed to win back the last loss. It is oversized, unplanned, and entered angry. The rule is mechanical: after two consecutive stopped-out trades, stand up, close the platform, and write both trades in the journal before you are allowed another entry.
Rule 6 — Know your costs
Spreads, commissions and overnight swap charges are the market's rent. On small timeframes they can quietly exceed your edge. Your journal should record the spread you paid on every trade so the cost of your style is a number you know, not a leak you suspect.
Rule 7 — The 90-day paper rule
Ninety days of paper trading with a complete journal, following every rule above, before real capital is even discussed. If the rules cannot survive pretend money, they will not survive the real thing — and finding that out for free is the entire point of the exercise.
Print these. Rules taped to the wall beat rules kept in your head. Then enforce them with the journal template — a rule without a record is just an intention.