MT4 Template Stock Indices System

A Stock Indices System refers to a set of stock indices rules that you follow to manage your trades. These written stock indices rules will determine when you open a trade & when you will exit. A stock trade system is created by combining two or more technical indicators.

For example, the Stochastic Oscillator technical indicator can be combined with other indicators to form a stock indices system. For this example - stochastic oscillator can be combined with the technical indicators below to come up with the following trading system.

• RSI indicator
• MACD indicator
• Moving Averages indicators

Examples - MetaTrader 4 Template Stock Indices System Example

Creating a Stock Indices System - Stock Indices System Trading Example

So the question is how can a trader come up with stock trading systems that work like the stock indices system example above and how does one write it's stock indices rules? to write the stock indices system trading rules follow steps below.

Seven steps to creating an technical indicator based system

To come up with these set of stock indices rules we use the following seven steps.

1. Choose your Chart Time-Frame

This first step depends on how many hours you want to dedicate to stock indices. Whether you prefer sitting in front of the computer constantly for several hours analyzing short chart time frames OR you prefer setting up your charts using bigger chart time frames once or twice a day. Choosing a chart time frame will mainly depend on what type of trader you are.

Chart Time Frames on MT4 Software

While testing your new stock trading system you may want to find out about its performance on different chart time frames and then choose the most accurate & profitable chart time frame for you.

2. Choose indicators to identify a new trend

The goal of a trader is to get into the trade as early as possible and take maximum advantage of stock price moves.

One of the common ways to spot a new trend as fast as possible is to use Moving Averages Indicator. A simple strategy is to use a MA crossover system that will identify a new trading opportunity at its earliest stage.

Moving Average Crossover Technique

Sell signal & Buy trading signal Generated by Moving Average Crossover Stock Indices Method

3. Select additional indicators to confirm the trend

Once we find a new trend we need to use additional indicators that will confirm the entry signals & give either a green light for action or save a trader from fake-outs.

To confirm the signals we use RSI indicator & Stochastic Oscillator indicator.

RSI Indicator & Stochastic Oscillator Indicator System

4. Finding entry and exit points

Once technical indicators are chosen so that one indicator gives the trading signal and another indicator confirms the trading signal, it is time to enter a stock trade transaction.

A trader should enter a trade as soon as a stock signal is generated and confirmed after a candlestick closes.

Aggressive traders enter a trade transaction immediately without waiting for the current stock price bar to close.

Other traders wait until the current stock price bar is closed and then enter the trade transaction if the trade setup has not changed and the signal remains valid. This method is more considerate and prevents additional false entries and fakeout whipsaws.

Generating Signals - how to Generate Signals.

Generating Trade Signals

For exits, a trader can either set an amount that wants to earn per trade or use technical tools that help to set profit goals like Fibonacci expansion tool or set a protective stop loss depending on the market volatility at any given time. Alternatively a trader can exit when the indicators give an opposite trading signal.

When opening a new trade transaction it's always important to calculate in advance how much you're willing to lose if the trade goes against you. Although the goal is to create the best stock index system in globe, losses are inevitable & therefore being ready to tell where you'll give up & cut your losses before starting a trade is very important.

5. Calculate risks in each trade setup

In Stock Indices, you must calculate your risk for each trade. Serious traders will only enter & look to open an order if the risk:reward ratio is 2:1 or more.

If you use a high risk:reward ratio like 2:1, you significantly increase your chances of becoming profitable in the long run.

The Risk to Reward Chart below shows you how:

Stock Index Money Management Reward Risk Chart - Example Template Stock Indices System

In the first examples of Risk to Reward Ratio, you can see that even if your stock indices system only won 50% of your trades, you would still make profit of $10,000. Read more on this stock indices money management stock indices topic: Here Money Management Rules - MetaTrader 4 Template Stock Indices System and Stock Index Money Management Strategies - Template Stock Indices System Example.

Before opening a new trade, a trader should define the point at which they will close the trade if it turns to be a losing trade. Some traders use Fibonacci retracement levels tool and support and resistance zones. Other traders just use a pre-determined stop loss to set stop loss orders once they have opened a trade trade transaction.

6. Write down the stock indices systems stock indices rules and follow them

A Stock Indices Trade System refers to a set of rules that you follow to manage your trades.

The keyword is A SET OF TRADING RULES which you must follow. If you don't follow the stock indices rules then you don't even have a stock indices system in the first place.

The next stock trading systems lesson displays to you an example of how to use the above steps to come up with your own Stock Indices Trading online stock indices system:

Next Guide: Example of Writing Trade Systems Rules

7. Practice on a Demo Account

Without enough trades, you will not be able to realize the true profitability of your trading system.

Once you have your trading system rules written, it's time to test & improve your trade system by using it on a practice account.

Open a free practice trading account & trade your stock indices system to see how well it will respond.

It is strongly recommended to begin with a practice account and practice for at-least for 1 or 2 months so as to gain some practice & experience how the market works.

Once you start making some decent profit on your demo stock account you can then try opening a live stock trading account & begin trading with real money.