How to Generate Trade Signals with Indices Strategies
Signals MT4 Trading Indicator Strategy
The only method of trading is through signals, It's best to learn how to generate these trade signals for yourself, this way you do not have to rely on other traders to generate them signals for you.
Generating trading signals is not easy and requires you to have a lot of stock trading analysis knowledge & experience, but the earlier you begin practicing how to generate these trade signals for yourself the better it's for you.
A good method of how to practice generating trade signals with systems is to open a free practice Indices practice account & test your trading signals on this practice demo account risk free without investing your money, then once you have tested your trade strategies & they are profitable on the practice demo account you as a trader can the use these signals on a live account.
The technique and method of how to practice generating these signals as well as how to back test the signals on the demo account using MT4 software is discussed below:
So, How Can a Trader Generate Trade Signals?
The best strategy of generating signals is through systems, You can Learn how to develop indices systems from the lesson how to create Systems on the right navigating menu under the lessons Key Concepts.
A stock system is a combination of one or two or more indicators with written trading guidelines of how these indicators will generate these stock signals.
Take an example of the simplest system or strategy known as MA cross-over method. A buy signal or sell signal is generated when there's a crossover of the 2 moving averages: either a buy signal for an upwards Moving Average crossover or a sell signal for downwards trend.
Stock MT4 Signal Indicator - Signals MT4 Indicator Strategy Moving Average Cross-over Strategy
The system example explained & shown below shows a system using the above moving average strategy combined with the RSI and MACD indicators to generate buy and sell trades.
Example of Generating Stock MT4 Free Signals - Signals MT4 Indicator Strategy
When it comes to generating buy & sell signals, stock traders should use simple systems to generate these stock signals.
Stock MetaTrader 4 Signal Indicator - Signals MT4 Indicator Strategy - Buy and Sell Trading Signals
Signals MT4 Indicator Strategy
An example of a indices system that works, is one that is a combination of:
- Moving average cross over trading strategy method
- RSI
- MACD
The written rules are:
Generating Stock Index Signals Strategy - Trading System Examples
Trade Rules:
Buy Trading Signal is Generated when:
- Both Moving averages going up
- RSI value above 50
- MACD above center-line
Sell Trading Signal is Generated when:
- Both Moving averages going down
- RSI below 50
- MACD below centerline
Generating Buy and Sell Trades - Example Illustrations of a Trading Method
Exit Signal
Exit signal is generated when the Moving Average MA Moving Average, RSI & MACD indicator give a trading signal in the opposite direction.
The chart time frame to use is 1 hour chart time frame or 15 minutes chart time frame depending on what type of trader you are.
For a beginner trader the above written rules will give good buy & sell signals, the only thing which a trader needs to do is to develop the discipline to follow the written trade signals rules the exact way they are, & wait for a buy/sell trade position to be indicated by your strategy and trade after the signals have been generated, not before they are generated.
Back Testing
Generating Signals with a system is one of the easiest method to trade indices, it's the best way that a beginner trader can attempt to identify the direction of the market price trend with a good level of accuracy, and with a little back testing on practice trade account so as to gradually increase the level of accuracy of this signal strategy
Best way to backtest a trading strategy is by following these 2 steps:
- Paper Trade
- Stock Practice Demo Trade
Indices Paper Trading - This method of testing a system involves setting your system on the charts, then take the trading chart back to a given date, 3 months back e.g., & then using this chart history to identify where your trading strategy would have given buy, sell and exit signals. Write down these points and the profit per trade on a piece of paper and then calculate the total profit after you have recorded a good number of stock trades such as 50 paper trades indices transactions and determine if your method is overall profitable, the win ratio, the loss ratio & the risk:reward.
This is an ancient strategy of testing systems which was used by traditional traders when there was no online markets or computers for that matter, the trader would use tools like A3 or A2 paper, graph format paper and draw the charts manually (Imagine plotting the charts on your platform software manually each day each hour, would you be ready to do that? I doubt) Those traders were hardworking than most, some were so used that they still continue to paper trade the online market and draw the charts on paper, anyway for our paper trading method example, just a sample data of 50 trade positions is all we need.
A good tool to use to back-test your stock system is known as the MT4 Indices Step-by-Step Tool. Found on MT4 charts tool bar of MT4 software, If you want to find the charts tool bar on the MetaTrader 4 software it is at the top of the MT4 software. If it's not: Click View (next to file, top-left corner of MT4)>>> Tool Bar >>> Charts. Then click Customize button >>> Select Indices Step-by-Step >>> Click Insert >>> Close.
Meta Trader 4 Platform Chart Toolbars - How to Trade for New Traders
Indices Step by Step Button for Back Testing Systems Discussed
Once you get this MT4 tool you as a trader can move your stock chart backwards, & use this MT4 tool to move the charts trading step-by-step while at the same time testing out when your system would have derived and generated either a buy or sell transaction, and where you'd have exited the trade transaction, then writedown the amount of profit/loss per trade and out of a sample number of trade transactions you'd then calculate the overall profits & losses generated by the strategy.
If your strategy is profitable on paper then, it's time to practice demo trade and testing if the it is profitable on real market as it's on paper method. This is the process of testing or back testing a trade system.
Maintain a Journal to keep record of profitable trade positions, and determine why these trade transactions were profitable. And also keep a log of all losing positions, determine why these trades made a loss & then avoid making the same mistakes the next time that you trade using your trading strategy.
Tweak your indices system until you get a good risk-reward ratio, with signals which you generate. Aim for a good risk: reward of 3:1 and a win ratio of above 70% is a good ratio, with good money management even a trading strategy with a win ratio of even 30% i.e. Less than half of your trade positions make profit you as a trader can still earn a profit. You may want to read this lesson to learn what the table/illustration below is all about: Risk Reward Ratio.
Risk to Reward Ratio Chart of Money Management Strategy - Strategies Methods Explained
Read Money Management Methods and Strategies Lesson Tutorial
A manual system is still the best way to generate signals in-comparison to automated systems, a manual strategy is a better technique and is also much simpler to implement.
However, other traders prefer automated trading systems & for those then they can check the info on this page MQL5 EAs and automated systems.
You also can view our extensive list of indices strategies topics that provides you with various methods of buy & sell analysis using a number of diverse technical methods, navigate to Indices Strategies Section.
Study More Lessons and Tutorials & Courses:
- How Can I Place US100 in MetaTrader 4 iPad Trade App?
- How to Place a Stock Index Order on MetaTrader 5 Mobile Indices App
- How to Open MetaTrader 4 Real Indices Trade Account in MetaTrader 4 Software Platform
- Explanation of Index Market
- Opening a Deleted Index Chart in MetaTrader 4 Software Platform
- How to Draw Indices Trend lines Analysis
