How Do You Trade Online Index

By now you have learned all the basics required for starting stock index & you have setup the trading platform, opened a demo account and learned about the trading platform. The next step is to learn how to trade index & how to analyze and interpret indices to figure out whether to buy or sell a particular stock index.

When to Open Buy/Sell Trade

As a trader you'll need to come up with a method that will determine when you'll open a buy trade and when you will open a sell trade. The way to do this is to come up with a system - a strategy is a set of rules that you will use to figure out when you'll open a trade.

Stock Index Strategy

For this tutorial we shall create a simple system which will show you the trade rules that you will use to open/execute your first trades.

For our trading system we shall use two indicators, MA Indicator and the RSI Indicator. These are commonly used indicators & if you want to know where to find them on your platform software, then you as a stock indices trader can go to the insert menu as is displayed below: Just click 1. Then click 2. And then click 3 and 4 and you'll find these 2 technical indicators - once you click them they'll be set on the charts.

Once you have inserted the indicators the trading system will look like the example below.

The above strategy is using the following technical indicators:

1. Moving Average MA 5 - yellow line

2. Moving Average 7 - red line

3. RSI 14

The rules below are used to generate buy & sell trades:

Buy Trade Rules

1. Both MAs are moving upwards

2. RSI is above 50 center-line mark

Sell Trade Rules

1. Both MAs Moving Averages are going downwards

2. RSI is below the 50 center-line mark

As an illustration the when 2 moving averages(MAs) are used this is referred to as the MA crossover system & a signal gets generated/derived when both moving averages are moving in the same direction either upwards or downwards.

For RSI the 50 center-line mark is used to generate trading signals, this 50 level is labeled and marked such as shown above, when the RSI is above 50 mark it show prices are closing higher than they opened & when RSI is below 50 it shows prices are closing lower than they opened.

This two explanation form the basis of our above trading system, let us now look at 2 examples one for generating a buy trade & the other for generating a sell trade.

Buy Trading Signal

For this buy trade we shall look at an earlier trade that had been setup previously using this trading system, but for our sell example we shall open a real time market trade & wait to see how the signal plays out, but for now let us look at buy trade.

For the above trade our buy trades were opened when the 2 buy rules were met, buy trade positions were placed where the green dotted lines are - the 2 buy signals are expounded on the trading chart above.

For the Moving average the place where the 2 moving averages started to move upward on the chart are market and this is where our buy signal was generated.

To confirm this trading signal we used a second indicator, RSI indicator that also confirmed the buy signal when RSI line moved above 50 center-line mark, this is when as a trader you would have opened your buy trade because the two indicators used in our trading system have both given a buy signal.

Take Profit - As a trader you also need to know when to close you open trade positions & take the profit. For this trade this is the point at where we closed our trade position, trade had been in the market for 18 hours and we did not want to leave our trade open overnight, so we closed our trade after a nice profit and continued trading the next day.

Remember as a day trader you don't want to leave you trade transactions open overnight, always open & close all trades within the day, close your trade go to sleep and wait to open other trades the next day.

From the example you as a stock indices trader can see that even when this trade was closed the market was still moving up but it's good not to be too greedy & always book profits while still ahead. Taking profits fast is one of the aspects which will determine if you earn money or not when trading indices it is best to always book your trading profit at the end of every day & continue trading the following day, every day there is always a index that provides a good opportunity to make profit.

Sell Trade

For our sell trade we open a real time market trade & give it time to develop so as to make profit.

This sell trade has been opened because our sell signals have been met; these are both moving averages are moving downwards & the RSI has confirmed this sell signal because it is below the 50 center-line mark showing the trend is downward.

Saving a System - About Templates

Once you come up with the above trading system, you'll need to save it that way you quickly load the same setup on another chart without having to select and choose all these technical indicators every time you open a new chart.

To do this you'll use the " Save Template " option on your indices platform as is shown & illustrated and shown below:

From the above template button you as a stock indices trader can save as many systems as possible & use the same shortcut on your platform to load these trading systems on other charts that you open using the " Load Template " button.

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