Discipline: the rules you do not break
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.
A five-point checklist before one AUD/USD trade
| Step | Amount | Note |
|---|---|---|
| 1. Direction and reason | AUD/USD near 0.6640 | The price you see on the chart before you do anything else. |
| 2. Entry, stop and target in pips | Stop 20 pips, target 40 pips | Your own numbers, written down before the order is placed. |
| 3. Position size from the stop | 0.10 standard lots | One 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$20 | 20 pips x 1 unit per pip, converted to Australian dollars at the rate your broker quotes. |
| 5. Session end time | One hour | A fixed time to stop, whether the trade is open or closed. |
Your broker may round the position size, charge a spread on entry and exit, and quote a different conversion rate, so the final A$ risk can vary between brokers.
The mistake 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.