BackTesting Trade Systems - Testing Strategies

Generating Indices Signals with a Indices system is one of the easiest method to trade Index, it's the best way that a Index beginner can attempt to figure out the direction of the Indices market trend with a good level of accuracy, & with a little back testing on practice demo trading account so as to gradually increase the level of accuracy of this Index signals strategy

Best way to back test a Index strategy is by following these two steps:

Index Paper Trade
Demo Trade

Index Paper Trading- This method of testing a Indices system involves placing your system on the Index trade charts, then take the Indices trade chart back to a particular date, 3 months back e.g., and then using this Stock Indices trade chart history to figure out where your strategy would have given buy, sell and exit Indices 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 Indices trade positions such as 50 paper trade positions Stock Index trade transactions & determine if your strategy is overall profitable, the win ratio, the loss ratio & the risk reward.

This is an ancient method of testing Index systems that was used by traditional investors when there was no online exchange markets or computers for that matter, the Stock Index trader would use tools like the A3 or A2 paper, graph format paper and plot the charts manually (Imagine drawing the charts on your trade software by hand every day or every hour, would you be ready to do that? I doubt) Those investors were hard-working than most, some were so used that they still continue to paper trade the online Indices market & plot the Index trade charts on paper, anyway for our paper method example illustration, just a sample data of 50 trade positions is all we need.

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

MetaTrader 4 Platform/Software Chart Tool Bars - How to Trade Indices For Beginner Traders

How to Use Stock Index Systems for Generate Indices Trade Signal - How to Find and Get Signal Using Index Trade systems

MT4 Chart Tool Bars - Step by Step Button for Testing Trade Systems Explained

Once you find this MetaTrader 4 Indices tool you as a stock indices trader can move your trade chart backwards, & use this MT4 tool to move the Indices trade charts step-by-step while at the same time testing when your system would have derived/generated either a buy or sell Indices transaction, & where you'd have exited the Index transaction, then write-down the amount of profit/loss per trade transaction and out of a sample number of Indices transactions you'd then calculate the over-all profits/losses generated by the Index strategy.

If your strategy is profitable on paper method then, its time to practice trade and testing if the it is profitable on the real market as it is on paper method. This is the process of testing or back testing a Index system.

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

Tweak your trading system until you get a good risk: reward ratio, with the Indices 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 equity money management even a Index strategy with a win ratio of even 30% i.e. Less than half of your trade positions earn and make profit you as a Stock Index trader can still make profit. You may want to study this tutorial to know and learn what the illustration below is all about: Risk to Reward Ratio.

How Do You Use Stock Index Systems for Generate Indices Trade Signal? - How to Find and Get Signal Using Index Trading Strategies

Risk to Reward Ratio Chart of Money Management Strategy - Trading Strategies Explained

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

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

You can also view our extensive listing of trading strategies tutorials that provides you with various methods of buy & sell technical analysis using a number of diverse technical methods, navigate to Indices Strategies Section.

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BackTesting Trade Systems - Testing Strategies