Developing Indices System - Indices Strategies

When creating your own system or strategy, there are a few factors & aspects to keep in mind. Your strategy needs to be able to spot new trends, while at the same time making sure you don't to get faked out/whipsaws. The real trick is, once you have come up with a system which works for you, stick to it. Being disciplined will help you as a trader a lot in becoming successful.

Before Stock Index on a live/real account, you have to figure out what index strategy works for you. It's good to know in what time-frame you are going to be working in, & how much you are willing to risk once you begin. All these should be factored in, and should be written within your Indices plan. A good place to test this would be on a free practice trade account. This is where you test out your strategies risk-free without investing/depositing money to figure out which strategy is best fitted for you.

So, now how can a trader like you come up with a "good trading system" or "best system"?

To create a good currency strategy the first thing to do is to define your objective or goal:

The following example shows a goal and explains the rules of how to achieve that objective

Goals

1. Identify a new trend

Moving Average(MA) crossover trading strategy method is the most often strategy used to identify a new trend. The time to open a long or short trade is determined when 2 averages crossover or cross under each other.

2. Confirm the new trend

Relative Strength Index(RSI) & Stochastic Oscillator are the most oftenly used indicators to confirm a trend.

Indicator-based

Best type of a method is one that is indicator-based. You will find it straightforward to generate the signals & thus less error-prone on your part & this will help you as a trader to avoid market whipsaw signals.

There are several things we want to achieve when creating a trade system:

Find entry points as early as possible.
Find exit points securing maximum gains.
Avoid fake entry & exit trading signals.
Proper Money Management Principles

Accomplishing these 4 goals will result in aprofitable strategy that works.

The last piece of info needed, is deciding how aggressive you are going to be when entering and exiting and getting out of a trade. Those who more aggressive would not wait until the chart candle 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 stable trading signal when entering the market.

To get profits out of the fx market you as a trader need to build your own profitable system: You need to have your own strategy that will help you as a trader achieve your goals. Sometimes the best trading systems are the ones that you build on your own. No need for you to keep searching online for the best Indices systems or for strategies which work, this website provides you with all the trading tools required to help you as a trader and guide you on how to make your own trading systems.

The currency system example above is made up of four indicators in total, all of these generate trade signals using different methods, MA will generate signals using the crossover method shown, RSI, Stochastic & MACD use different analysis to generate the long and short signals just as is displayed and illustrated in the above example. How to generate these signals is discussed in the next topic (on the sidebar navigation learn lessons menu under key concepts).

For beginners, it's difficult for the m to device their own Indices strategies since they do not have much knowledge about the fx market. However, this site will explain how one can create their own free system in just 7 easy guide-lines. Best strategy is the one you come up with yourself and learn how to trade the fx market with it.

Main advantage of making your own free trading systems is that you'll know how to make profits by yourself and not rely on other peoples efforts.

In the next tutorial located on the side-bar navigation learn lessons menu below the key concepts will show and explain to you how to create a system like that one above, write it's rules & how to back test it on a practice trade account before using it on a live/real account.

4 Examples of Free Systems

Example 1: The Moving Average Cross-over Method

The cross over method uses 2 moving averages to generate signals. The first Moving Average MA uses a shorter period and the second is a longer period.

Stock Index Trading Strategy Examples - How to Use Index Trading Systems on Trade Charts

Crossover Method- Indices System

This above method is referred to as the MA crossover trading strategy method because signals are derived and generated when 2 averages cross above or below each other.

Indices System Example - Short & Long signal Generated

A buy signal or going long trade gets generated when shorter average crosses above the longer average (Both MAs MAs Moving Averages Going Up).

A sell signal or a going short trade is generated when shorter average crosses below the longer average (Both MAs MAs Going Down).

Example 2: Stochastics System

Stochastic Oscillator can be combined with other indicators to form a trade system.

RSI
MACD
Moving Averages

Trading Systems Example

Short Signal or Sell Signal - Index Trading System

How the short signal was generated

From our rules the short signal is derived & generated when:

Both MAs MAs are heading down
RSI is below 50
Stochastic moving downwards
MACD moving downwards below centerline

The short signal was derived & generated when all written Indices rules were met. The exit trading signal is given when a trade signal in the opposite trend direction is generated.

The good thing about using such a method is that we are using different types of Index indicators to confirm the signals and avoid as many fake out whipsaw signals as possible in the process.

Stochastic - momentum oscillator
RSI - momentum oscillator
Moving Averages - trend following indicator
MACD - trend following indicator

Based on the Index trade chart time-frame used this strategy can be used as scalping trading system when the minute trading charts are used or as a day system when hourly trading charts are used.

Example 3: Trade System Stock Index Example

This trade system is fully illustrated within the Index plan on the Index plan tutorial on this website under the Indices key concepts tutorials located on the right navigation menu.

Chart Time-frame

H1 chart

Indicators that identify a new trend

Moving Average MA Crossover

Indicators that confirm the trend

RSI

STOCHASTIC OSCILLATOR

Long Entry

1. Both MA(moving averages) pointing upwards

2. RSI above 50

3. Both stochastics heading up

Short Entry

1. Both MA Moving Average pointing down

2. RSI is below 50

3. Both stochastic lines going down

Exit

1. Moving Average gives and generates in the opposite market trend signal

2. RSI generates in the opposite market trend signal

Risk Management

StopLoss - 35 pips

Take Profit - 70 pips

Reward : 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 strategy commonly referred to as the - 'New Gann Swing Chartist Trading Plan'. Within this method the Gann Swing Oscillator Trading is used to help figure out market swings for trading only within current trend is shown by the Gann Trend.

Below is the exemplification of the New Gann Swing Chartist Plan

The Gann Chartist Plan - Index Trading Systems

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