Back Testing Stock Indices Trading Systems - Testing Stock Indices Trading Systems

Generating Stock Indices Trading Signals with a Stock Indices trading system is one of the easiest method to trade Indices, it is the best way that a Stock Indices trading beginner can attempt to determine the direction of the Stock Indices market trend with a good level of accuracy, and with a little back testing on demo practice account so as to gradually increase the level of accuracy of this Stock Indices trading signals strategy

The best way to back test a Stock Indices strategy is by following these two steps:

1. Stock Indices Paper Trade
2. Stock Indices Demo Trade

Stock Indices Paper Trading- This method of testing a Stock Indices trading system involves placing your trading system on the Stock Indices charts, then take the Stock Indices chart back to a particular date, 3 months back for example, and then using this Stock Indices chart history to determine where your Stock Indices strategy would have given buy, sell and exit Stock Indices signals. Write down these points and the profit per Stock Indices trade transaction on a piece of paper and then calculate the total profit after you have recorded a good number of Stock Indices trades such as 50 paper trades Stock Indices transactions and determine if your Stock Indices trading method is overall profitable, the win ratio, the loss ratio and the risk: reward.

This is an ancient method of testing Stock Indices systems that was used by traditional investors when there was no online exchange markets or computers for that matter, the trader would use something like the A3 or A2 paper, graph format paper and plot the trading charts manually (Imagine plotting the charts on your Stock Indices trading platform by hand every day or every hour, would you be ready to do that? I doubt) Those investors were hardworking than most, some were so used that they still continue to paper trade the online Stock Indices market and plot the Stock Indices charts on paper, anyway for our paper method example, just a sample data of 50 Stock Indices trade transactions is all we need.

A good Stock Indices trading tool to use to back test your Stock Indices system is known as the MT4 Step by Step Tool. Found on the MetaTrader 4 Stock Indices charts toolbar of MT4 Stock Indices platform, If you want to find the Stock Indices charts toolbar on the MT4 platform it is at the top of the MT4 platform. If it is not: Click View (next to file, top left corner of MT4)>> Toolbar >> Charts. Then click the Customize button >> Select Step by Step >> Click Insert >> Close.

MT4 Platform Chart Tool Bars - How to Trade Stock Indices For Beginners

MT4 Chart Tool Bars - Step by Step Button for Back Testing Stock Indices Trading Systems Explained

Once you get this MT4 Stock Indices tool you can move your Stock Indices chart backwards, and use this MT4 Stock Indices trading tool to move the Stock Indices charts step by step while at the same time testing when your Stock Indices system would have generated either a buy or sell Stock Indices trade transaction, and where you would have exited the Stock Indices trade transaction, then write down the amount of profit/loss per Stock Indices trade transaction and out of a sample number of Stock Indices transactions you would then calculate the overall profits/losses generated by the Stock Indices trading strategy.

If your Stock Indices trading strategy is profitable on the paper then, its time to demo Stock Indices trade and testing if the it is profitable on the real market as it is on paper method. This is the process of testing or back testing a Stock Indices trading system.

Maintain a Stock Indices Trading Journal to keep track of profitable Stock Indices trades, and determine why these Stock Indices trades were profitable. And also keep a log of all losing Stock Indices trades, determine why these Stock Indices trades made a loss and the avoid making these same mistakes the next time you trade using your Stock Indices trading strategy.

Tweak your trading system until you get a good risk: reward ratio, with the Stock Indices trading signals that you generate. Aim for a good risk: reward of 3:1 and a win ratio of above 70% is a good ratio, with good Stock Indices money management even a Stock Indices strategy with a win ratio of even 30% i.e. less than half of your Stock Indices transactions make profit you can still make a profit. You might want to read this topic to know what the table below is all about: Risk : Reward Ratio.

Risk to Reward Ratio Chart of Money Management Strategy - Indices Trading Strategies Explained

A manual Stock Indices trading system is still the best way to generate Stock Indices signals compared to automated Stock Indices trading systems, a manual Stock Indices strategy is a better method and is also much simpler to implement.

However, other traders prefer automated Stock Indices trading systems and for those then they can check the information on this page MQL5 Expert Advisors and automated Stock Indices trading systems.

You can also view our extensive list of Stock Indices trading strategies topics that provides you with various methods of buy and sell technical analysis using a number of diverse technical methods, navigate to the Stock Indices Strategies Section.