How to Test Indices Strategy - Testing Stock Indices Trade Strategies

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

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

Index Paper Trade
Stock Index Demo Trade

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

This is an ancient method of testing Indices Strategies that was used by traditional investors when there was no online exchange markets or desktop pc computers for that matter, trader would use something like the A3 or A2 paper, graph format paper and plot the charts manually (Imagine plotting the charts on your trade 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 market and plot the trade charts on paper, anyway for our paper method example, just a sample data of 50 trades is all we need.

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

MT4 Software Chart Tool Bars - How to Trade Indices For Beginners

How to Test Indices Strategy - Testing Strategy Examples Explained

MT4 Chart Tool Bars - Step by Step Button for BackTesting Stock Indices Trade Strategies Explained

Once you get this MetaTrader 4 tool you can move your trade chart backwards, & use this MetaTrader 4 trading tool to move the trade charts step by step while at the same time testing when your Indices Strategy would have generated either a buy or sell trade, & where you would have exited the trade, then write down the amount of profit/loss per Stock Indices trade transaction & out of a sample number of transactions you would then calculate the overall profits/losses generated by the strategy.

If your strategy is profitable on the paper trading method then, its time to demo practice trade & testing if the it is profitable on the real market as it is on paper method. This is the process of testing or backtesting a Strategy.

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

Tweak your Indices Strategy until you get a good risk: reward ratio, with the 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 equity management even a 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.

How Do I Test Trade Strategy? - Testing Strategy Examples Explained Explained

Risk to Reward Ratio Chart of Money Management Strategies - Trade Strategies Explained

A manual Indices Strategy is still the best way to generate trading signals compared to automated trading Strategies, a manual Indices strategy is a better method & is also much simpler to implement.

However, other traders prefer automated trading Strategies & for those then they can check the information on this page MQL5.com Expert Advisors and automated trading Strategies.

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

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Trade Stock Indices

How to Test Indices Strategy - Testing Stock Indices Trade Strategies