Strategy specification
Course context: This lesson belongs to a practical beginner curriculum for Pakistan.
| Module | Question the rule must answer |
|---|---|
| Market regime | Trend, range, event or low-liquidity state? |
| Entry | Which observable condition triggers a decision? |
| Invalidation | Which price proves the idea wrong? |
| Exit | Target, trailing rule, time exit or regime change? |
| Sizing | How does stop distance become cash risk and volume? |
| Pause rule | Which drawdown, error or market event stops trading? |
Three strategies need different conditions
| Family | Working assumption | Typical failure |
|---|---|---|
| Trend following | Directional persistence | Repeated losses in a range |
| Breakout | Volatility expands after compression | False break and slippage |
| Mean reversion | Price returns to a stable centre | A new trend makes the centre obsolete |
Walk-forward protocol
- Choose one pair and one timeframe.
- Freeze the cost model and rules.
- Estimate parameters on the first training window.
- Evaluate on the following untouched window.
- Move both windows forward and repeat.
- Aggregate only out-of-sample results.
- Run a real-time demo test without changing rules mid-sample.
Portfolio exposure matters
Long EURUSD, long GBPUSD and short USDCHF can all express similar short-USD risk. Add planned losses by currency and direction, not only by ticket. Limit single-trade risk, correlated-theme risk, daily loss and total open risk separately.
Pakistan demo assignment
For seven sessions, compare one trend rule and one mean-reversion rule on EURUSD. Use the same USD cash risk and record spread at the decision time. The deliverable is not a profit screenshot; it is a table showing regime, rule compliance, planned R, actual R, cost and reason for exit.
Useful platform facts
EA automation requires MT4 or MT5 Desktop. MQL4 and MQL5 programs are not interchangeable. Web and mobile terminals do not run desktop EAs. If using code, test error handling and execution separately from the market signal.
Official EA guide
Questions from a first-time learner
What makes a strategy advanced?
Complete, testable rules and risk controls—not indicator count or leverage.
Can I optimise parameters on all available history?
No. Keep an untouched time-ordered sample for evaluation.
Should correlated trades each use the full risk budget?
No. Aggregate shared currency and directional exposure.
When should the demo test stop?
At the predefined loss, execution-error or rule-violation threshold.