Developing a Indices Trade System - Stock Indices Trade Strategies
When creating your own Indices trading system or index trading strategy, there are a few things to keep in mind. Your index trading strategy needs to be able to spot new Stock Index market trends, while at the same time making sure you do not to get faked out/whipsaws. The real trick is, once you have created a Indices trading system that works for you, stick to it. Being disciplined will help you a lot in becoming successful.
Before trading Stock Indices on a live Indices account, you have to figure out what indices trading strategy works for you. It is good to know in what time-frame you are going to be working in, & how much you're willing to risk once you begin. All these factors should be factored in, & should be written down within your Stock Index trading plan. A good place to test this would be on a free index practice account. This is where you test your strategies risk free without investing money to determine which strategy is best suited for you.
So, now how can a trader like you come up with a "good trading system" or the "best Stock Indices trading system"?
To come up with a good currency trading strategy the first thing to do is to define your objective or goal:
The following example illustrates a goal & explains the rules of how to achieve that goal
Goals
1. Identify a new trend
Moving average crossover method is the most commonly strategy used to identify a new trend. The time to open a long or short trade is determined when two averages cross over or cross under each other.
2. Confirm the new trend
Relative Strength Index(RSI) & Stochastic Oscillator are the most commonly used indicators to confirm a Indices trend.
Indicator-based
The best type of a trading method is one that is indicator-based. You will find it straightforward to generate the trading signals & thus less error-prone on your part and this will help you to avoid market whipsaws.
There are several things we want to achieve when creating a Indices trading system:
- Find entry points as early as possible.
- Find exit points securing maximum gains.
- Avoid fake entry & exit signals.
- Proper Money Management Rules
Accomplishing these four goals will result in aprofitable Indices trading strategy that works.
The last piece of information needed, is deciding how aggressive you are going to be when entering and exiting a trade. Those who more aggressive wouldn't wait until the chart candlestick closes & would enter as soon as their indicators match up. But most would wait until the chart candlestick of the timeframe they are using has closed, to have more stability when entering a the market.
To get huge profits out of the forex market you need to build your own profitable Indices trading system; You need to have your own strategy that will help you achieve your trading goals. Sometimes the best Stock Indices trading systems are the ones that you build on your own. No need to keep searching online for the best Stock Indices systems or for Stock Indices trading systems that work, this website provides you with all the tools required to help you & guide you on how to come up with your own Indices systems.
The currency trading system example above is comprised of four technical indicators in total, all of these generate Indices trade signals using different methods, moving average will generate signals using the crossover method shown, RSI, Stochastic & MACD use different analysis to generate the long and short signals as shown in the above example. How to generate these Indices signals is discussed in the next topic (on the sidebar navigation learn trading lessons menu under key concepts).
For beginners, it is difficult for the m to device their own Stock Index strategies since they do not have much knowledge about the forex market. However, this site will explain how one can create their own free Indices trading system in just seven easy steps. The best strategy is the one you come up with yourself and learn how to trade the forex market with it.
The main advantage of creating your own free Indices trading systems is that you'll know how to make profits by yourself-and not rely on other peoples efforts.
In the next lesson located at the sidebar navigation learn trading lessons menu below the key concepts will show you how to create a Indices trading system like the one above, write it's rules & how to back test it on a practice demo account before using it on a live Indices account.
4 Examples of Free Indices Trade Systems
Example 1: The MA Crossover Method
The cross over method uses two moving averages to generate Indices signals. The first MA uses a shorter period & the second is a longer period.
Crossover Method- Stock Index Trade System
This above method is referred to as the moving average crossover method because signals are generated when the two averages cross above or below each other.
Stock Index System Trading Example - Short and Long signal Generated
A buy signal or going long trade is generated when the shorter average crosses above the longer average (Both Moving Averages Going Up).
A sell signal or a going short trade is generated when the shorter average crosses below the longer average (Both Moving Averages Going Down).
Example 2: Stochastics Stock Index Trade System
Stochastic Oscillator can be combined with other Stock Indices indicators to form a system.
- RSI
- MACD
- Moving Averages
Trade Systems Stock Index Example
Short Signal or Sell Signal - Stock Indices Trade System
How the short signal was generated
From our rules the short signal is generated when:
- Both Moving Averages are heading down
- RSI is below 50
- Stochastic moving downwards
- MACD moving downwards below center-line
The short signal was generated when all the written Indices trading rules were met. The exit signal is generated when a signal in the opposite direction is generated.
The good thing about using such a method is that we are using different types of Stock Indices indicators to confirm the signals & avoid as many whipsaws as possible in the process.
- Stochastic - momentum oscillator
- RSI - momentum oscillator
- Moving Averages - trend following indicator
- MACD - trend following oscillator
Based on the Stock Index trade chart time-frame used this stock indices trading strategy can be used as Stock Index scalping system when the minute charts are used or as a Indices day trading system when hourly charts are used.
Example 3: Trade System Indices Example
This Stock Index trading system is fully explained within the Stock Index trading plan on the Stock Index trading plan tutorial on this website under the Indices key concepts section located on the right navigation menu.
Chart Time frame
1 hour chart
Indicators that identify a new trend
Moving Average Crossover
Indicators that confirm the trend
RSI
STOCHASTIC OSCILLATOR
Long Entry
1. Both MA(moving averages) pointing up
2. RSI above 50
3. Both stochastics going up
Short Entry
1. Both MA pointing down
2. RSI below 50
3. Both stochastics going down
Exit
1. MA gives opposite signal
2. RSI gives opposite signal
Risk Management
Stop loss- 35 pips
Take Profit- 70 pips
Reward to Risk 2:1
Example 4: New Gann Swing Chartist Plan
The Gann Swing Oscillator is meant to be used in combination with the Gann HiLo Activator & Gann Trend to form a complete Indices strategy commonly referred to as the - "New Gann Swing Chartist Plan". Within this methodology the Gann Swing Oscillator is used to help determine market swings for trading only within the current market trend is shown by the Gann Trend.
Below is the example of the New Gann Swing Chartist Plan
The Gann Chartist Plan - Stock Indices Trade Systems
