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've tested your trade strategies & they are profitable on the practice demo account you can the use these signals on a live account.
The methodology and procedures for practicing the creation of these indicators, alongside how to retrospectively test them on a demo account using the MT4 software, are detailed in the subsequent paragraphs.
So, How Can One 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 example below shows a strategy that combines moving averages with RSI and MACD to generate buy and sell signals.
Example of Generating Stock MT4 Free Signals - Signals MT4 Indicator Strategy
In generating buy and sell signals, stock traders should employ straightforward systems to produce these stock signals.
Stock MetaTrader 4 Signal Indicator - Signals MT4 Technical Indicator Method - Buy and Sell Trading Signals
Signals MT4 Indicator Strategy
An effective indices trading system is one that integrates:
- Moving average cross over trading strategy method
- RSI
- MACD
The written down rules are:
Generating Stock Index Signals Strategy - Trading System Examples
Trade Rules:
Buy Trading Signal is Generated when:
- Both Moving averages going upward
- RSI value above 50
- MACD above center-line
Sell Trading Signal is Generated when:
- Both moving averages MAs going down
- RSI below 50
- MACD below centerline
Generating Buy and Sell Trades - Example Illustrations of a Trading Method
Exit Signal
Exit when the Moving Average, RSI, and MACD signal the opposite way.
The appropriate chart temporal setting should be either the 1-hour timeframe or the 15-minute timeframe, selected according to your defined trader classification.
For novice traders, the trading rules outlined above provide effective buy and sell signals. A trader should cultivate the discipline to adhere strictly to these rules, awaiting signal indications from their strategy before executing trades.
Back Testing
Generating Signals with a system is one of the easiest method to trade indices, it's the best way that a beginner 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 accurateness 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 generated 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've recorded a good number of stock trades such as 50 paper trades indices transactions and determine if your method/technique is overall profitable, the win ratio, the loss ratio & the risk:reward.
Old-school traders did things differently. Before the days of online markets and computers, they'd grab an A3 or A2 sheet of graph paper and draw their charts by hand. Imagine plotting every price move, hour after hour, day after day, all by hand - most people wouldn't even consider it now. Those traders worked hard, and some still prefer paper trading even in this digital age. But for our example, you only need a sample of 50 trades to get going with this paper trading approach.
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 this MT4 utility is acquired, you possess the capability to move the stock chart backward in time. This MT4 feature permits step-by-step chart navigation while simultaneously back-testing when your strategy would have generated a buy or sell transaction, and crucially, at which point the trade position would have been closed. You should then record the resultant profit or loss for that specific trade, and from a predetermined sample of transactions, calculate the composite gains and deficits generated by the entire strategy.
If your plan looks good on paper, then it's time to try practicing with a demo account to see if it works in the real market like it does on paper. This is how you test or back-test a trading 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% - Less than half of your trade positions make profit you can still earn a profit. You may want to study this lesson to learn what the table/illustration below is all about: Risk to 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 which offers you with various techniques & 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
