What you will learn
- Setup definition
- Entry and invalidation
- Exit and cancellation rules
- Conditions for no trade
Setup definition
Define a setup using observations available at the decision time. Words such as strong or obvious need operational meaning. Another learner should be able to identify both qualifying and nonqualifying examples from the written rule.
Entry and invalidation
An entry trigger specifies what action becomes eligible and when. Invalidation specifies what would contradict the idea or end eligibility. A price objective alone is incomplete because it does not define when the hypothesis has failed.
Exit and cancellation rules
Exit and cancellation rules govern positions and unfilled orders separately. Include a time-based expiry where relevant. A trade that never enters still needs a clear rule for when its working order should no longer remain active.
Conditions for no trade
No-trade conditions are part of the strategy, not a failure to act. Examples include missing required data, an unavailable instrument or costs outside the research assumptions. Define them before seeing a tempting price move.
Worked example
A plan says buy a strong breakout but defines neither strong nor the reference level. Two learners select different trades. Replacing it with a specified observation window, level rule and confirmation condition makes disagreement visible and testable.
Try it yourself
Rewrite an ambiguous setup using observable context, trigger, invalidation and expiry fields. Include one condition that requires staying out.
Show the worked solution
The answer should define each field without relying on a future price path. Staying out might follow missing data needed by the rule. A rule can be precise and still unprofitable; precision makes it testable, not correct by itself.
Apply this to your course project
Submit a one-page demo plan with eligibility, invalidation and review rules.
Keep the calculation inputs, assumptions and decisions with your work. Practical exercises are self-reviewed; the scored knowledge checks assess the questions shown, not an independent certification of practical competence.