How to Test Stock Indices Trade Strategy - Testing Index Trade Strategies

Generating Trade Signals with a Strategy is one of the easiest method to trade Stock Index, it is the best way that a beginner can attempt to figure out the direction of the market price 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 trading signals strategy

Best way to back-test a strategy is by following these 2 steps:

Index Paper Trade
Stock Index Demo Trade

Stock Index Paper Trading- This method of testing a Strategy involves placing your Stock Indices Trade Strategy on the trade charts, then take the trade chart back to a particular date, 3 months back e.g., & then using this trade chart history to figure out where your Index strategy would have given buy, sell & exit signals. Write down these points & the profit per Index trade transaction on a piece of paper and then calculate the total profit after you have recorded a good number of trade transactions like 50 paper trade positions Index transactions & determine if your Index 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 such as 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 Stock 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 MT4 platform software it is at the top of MetaTrader 4 platform software. 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 on Insert >>> Close.

MT4 Software Chart Tool-bars - How to Trade Indices For Beginner Traders

How to Test Stock Indices Strategy - Testing Strategy Examples Explained

MT4 Chart Tool-bars - Step by Step Button for BackTesting Index Trade Strategies Explained

Once you get this MetaTrader 4 tool you as a stock indices trader can move your trade chart backwards, and use this MetaTrader 4 trading tool to move the trade charts step by step while at the same time testing when your Stock Indices Trade Strategy would have generated either a buy or sell trade, & where you would have exited the trade transaction, then writedown the amount of profit/loss per Index 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 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 and then avoid making these same mistakes the next time you trade using your trade strategy.

Tweak your Stock Indices Strategy until you get a good risk: reward ratio, with the trade 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 Index equity management even a strategy with a win ratio of even 30% i.e. Less than half of your Index transactions make profit you as a stock indices trader can still make a profit. You might want to read this topic to know and learn what the table/illustration below is talking about: Risk:Reward Ratio.

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

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

A manual Stock Index Trade Strategy is still the best way to generate trading signals compared & analyzed 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 Stock Indices Trade Strategy - Testing Index Trade Strategies