How to Generate Signals with Stock Indices Systems

Signals MetaTrader 4 Indices Trading Indicator Strategy

The only method of stock indices is through trading signals, It is best to learn how to generate these signals for yourself, this way you do not have to rely on other traders to generate them for you.

Generating signals is not easy and requires you to have a lot of technical analysis trading knowledge & experience, but the earlier you start practicing how to generate these signals for yourself the better it is for you.

A good method of how to practice generating trading signals with trading systems is to open a free practice practice account and test your stock signals on this practice account risk free without risking your money, then once you have tested your stock indices strategies & they are profitable on the demo practice account you can the use these signals on a live trading account.

The technique of how to practice generating these signals as well as how to back test the signals on the demo stock account using the MetaTrader 4 platform is discussed below:

So, How Can a Trader Generate Stock Trade Signals?

The best strategy of generating stock signals is through stock index systems, You can Learn how to come up with trading systems from the lesson how to create Stock Indices Systems on the right navigation menu under the tutorials Indices Trading Key Concepts.

A trading system is a combination of one or 2 or more technical indicators with written stock indices guide-lines of how these indicators will generate these trading signals.

Take an example of the simplest stock indices system or stock indices strategy known as moving average cross-over stock indices method. A buy signal or sell signal is generated when there is a crossover of the 2 moving averages: either a buy signal for an upward moving average cross-over or a sell signal for downward trend.

Generating Stock Indices MT4 Free Signals - Stock Indices Trading MetaTrader 4 Signal Indicator - Signals MT4 Indicator Strategy MA Crossover Strategy

The stock indices system example illustrated below shows a trading system using the above moving average strategy combined with the RSI and MACD indicators to generate buy and sell stock trades.

Example of Generating Stock Indices MT4 Free Signals - Stock Indices Trading MetaTrader 4 Signal Indicator - Signals MT4 Indicator Strategy

When it comes to generating buy and sell signals, stock traders should use simple stock indices systems to generate these trading signals.

Generating Stock Indices MT4 Free Signals - Stock Indices Trading MetaTrader 4 Signal Indicator - Signals MT4 Indicator Strategy - Buy & Sell Signals

Signals MT4 Indices Trading Indicator Strategy

An example of a simple stock index system that works, is one that's a combination of:

• Moving average cross-over strategy
• RSI
• MACD

The written stock indices rules are:

Generating Signals Strategy - Stock Indices System Examples

Trade Rules:

Buy Signal is Generated when:

• Both Moving averages going up
• RSI value above 50
• MACD above centerline

Sell Signal is Generated when:

• Both Moving averages going down
• RSI value below 50
• MACD below centerline

Generating Buy & Sell Stock Trades - Example of a Stock Indices Strategy

Exit Trade Signal

Exit signal is generated when MA, RSI and MACD indicator give a signal in 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 the above written stock indices rules will give good buy and sell stock signals, the only thing which a trader needs to do is to have the discipline to follow the written signals rules the exact way they are, and wait for a buy or sell trade transaction to be indicated by your stock indices strategy & trade after the signals have been generated, not before they are generated.

Back Testing

Generating Signals with a stock indices system is one of the easiest method to trade stock indices trading, it is the best way that a beginner can attempt to determine the direction of the market stock trend with a good level of accuracy, and with a little back testing on practice trading account so as to gradually increase the level of accuracy of this trading signals strategy

The best way to back test a stock index strategy is by following these 2 steps:

1. Stock Indices Trading Paper Trade
2. Stock Demo Trade

Stock Indices Trading Paper Trading - This method of testing a stock indices system involves placing your stock indices system on the charts, then take the chart back to a particular date, 3 months back for example, and then using this chart history to determine where your stock indices strategy would have given buy, sell and exit stock signals. Write down these points and the profit per trade transaction 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 transactions and determine if your stock indices method is overall profitable, the win ratio, the loss ratio and the risk:reward.

This is an ancient strategy of testing stock indices systems which was used by traditional traders when there was no online markets or computers for that matter, the trader would use something like the A3 or A2 paper, graph format paper and draw the charts manually (Imagine plotting the charts on your stock 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 & draw the charts on paper, anyway for our paper technique example, just a sample data of 50 trade transactions is all we need.

A good stock indices tool to use to back test your trading system is known as the MT4 Stock Indices Step by Step Tool. Found in the MetaTrader 4 charts toolbar of MetaTrader 4 platform, If you want to find the charts toolbar on the MT4 platform it is at the top of MT4 platform. If it is not: Click View (next to file, top left corner of MetaTrader 4)>>> Toolbar >>> Charts. Then click the Customize button >>> Select Stock Indices Step by Step >>> Click Insert >>> Close.

MetaTrader 4 Platform Chart Tool Bars - How to Trade Stock Indices for New Traders

MT4 Chart ToolBars - Stock Indices Step by Step Button for Back Testing Stock Indices Systems Explained

Once you get this MetaTrader 4 tool you can move your stock chart backwards, & use this Meta Trader 4 tool to move the charts stock indices step by step while at the same time testing when your stock indices system would have generated either a buy or sell trade transaction, & where you'd have exited the trade, then write down the amount of profit/loss per stock trade transaction & out of a sample number of stock indices transactions you would then calculate the overall profits/losses generated by the stock indices strategy.

If your stock indices strategy is profitable on paper then, it is time to demo stock trade and testing if the it is profitable on the real market as it is on paper trading technique. This is the process of testing or back-testing a trading system.

Writing a Trading Journal

Maintain a Stock Indices Journal to keep track of profitable stock trades, & determine why these trades were profitable. And also keep a log of all losing trades, determine why these trades made a loss and the avoid making these same mistakes the next time you trade using your strategy.

Tweak your stock indices system until you get a good risk to reward ratio, with the 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 stock indices money management even a strategy with a win ratio of even 30% i.e. Less than half of your transactions make profit you can still make a profit. You might want to read this topic to know what the table below is all about: Risk : Reward Ratio.

Risk to Reward Ratio Chart of Stock Index Money Management Strategy - Stock Indices Strategies Discussed

Read Stock Index Money Management Strategies Methods Tutorial Guide

A manual stock indices system is still the best way to generate signals compared to automated stock indices systems, a manual strategy is a better method and is also much simpler to implement.

However, other traders prefer automated trading systems & for those then they can check the information on this page MQL5 Stock Expert Advisors and automated trading systems.

You can also view our extensive list of stock indices strategies topics that provides you with various methods of buy and sell technical analysis using a number of diverse technical methods, navigate to the Learn Strategies Section.