How Do You Generate Signals with Trading Systems?
Only method of trading is through signals, It is best to learn how to generate these signals for yourself, this way you do not have to rely on other traders to generate them for you.
Generating signals isn't easy & requires you to have a lot of technical analysis knowledge and experience, but the earlier you begin practicing how to generate these signals for yourself the better it is for you.
A good method of how to practice generating signals with systems is to open a free practice demo trading account and test your signals on this practice trading account risk free without risking your money, then once you have tested your strategies and they are profitable you can then use them on a live account.
Method of how to practice generating these signals as well as how to back test them on the demo account using the MetaTrader 4 platform is discussed below:
So, How Can a Trader Generate Indices Trade Signals?
The best method of generating signals is through systems, You can Learn how to create Indices systems from the lesson how to create Systems on the right navigation menu under the topics Stock Index Key Concepts.
A Stock system is a combination of one or two or more technical indicators with written rules of how these indicators will generate these signals.
Take an example of the simplest system or strategy known as moving average crossover method. A buy or sell is generated when there is a crossover of the two moving averages: either a buy for an upwards crossover or a sell for downward trend.
Example of Generating Trading Signals Using MA MA Cross-over Method
The system example below shows a system using the above moving average strategy combined with the RSI & MACD indicators to generate buy & sell Stock Indices trades.
Example of Online Trading Systems and Trading Strategies
In generating buy & sell signals, Stock Indices traders should use simple Indices systems to generate these.
Stock Index Trading Systems
An example of a simple Stock system that works, is one that's a combination of:
- Moving average crossover strategy
- RSI
- MACD
The written rules are:
Generating Trading Signals Strategies - Trading System Examples
Stock Index Trade Rules:
Buy Signal is Generated when:
- Both Moving averages going up
- RSI value above 50
- MACD above center-line
Sell Signal is Generated when:
- Both Moving averages going down
- RSI value below 50
- MACD below center-line
Generating Buy & Sell Indices Trades - Example of a Strategy
Exit Signal
Exit signal is generated when MA, RSI and MACD indicator give a signal in opposite trend direction.
The chart time frame to use is 1 hour timeframe or 15 minutes chart time frame depending on what type of trader you are.
For a beginner trader the above written rules will give goodbuy & sell Stock Indices trade signals, only thing that a trader needs to do is to have the discipline to follow the written signals rules the exact way they are, & wait for a buy or sell Stock Indices trade transaction to be indicated by your strategy & trade after the signals have been generated, not before they are generated.
