The derailleur body has springs that pull the derailleur out and a cable that pulls it in. Then it has has limit screws to keep the chain from going off the smallest sprocket or cog on the cassette (highest gear) or the largest cog (lowest gear). Indexing is lining up the pulley with the cogs. This is adjusted with the barrel adjuster at the rear of the derailleur or at the shifter handle.
Start by setting the H-limit screw to the smallest cog on the rear cassette. Check that the hanger is not bent then put the chain on the largest chain ring (front sprocket), and the smallest cog on the rear sprocket. Continue pushing the shifter to make sure it is fully actuated outward (past the smallest cog).
Turn the barrel adjuster clockwise two turns so the cable releases to the spring. Now it won't impinge on the limit screw. Turn the H-limit screw clockwise (inward) in 1/2 turn increments, until the chain just rubs on the second cog. Turn the crank and listen for it to rub. Then turn the limit screw counterclockwise (or outward) 1/4 turn. If it's still noisy turn it another 1/4 turn. The high limit is now set.
If there are two chain rings, stay on the largest. If three, put it on the middle chain ring. Turn the barrel adjuster counterclockwise to line up the guide pulley with the first cog. Shift up one increment.
Over tighten the indexing and back off slightly. Turn the barrel adjuster counterclockwise (towards the spokes) until it is clearly out of the acceptable range. Listen for the chain to rub on the inboard cog. Then turn the barrel adjuster clockwise (outward) a 1/4 turn at a time until the noise is gone. Now check each cog one at a time. Listen for noise. If noise, turn the barrel adjuster clockwise 1/4 turn. Shift back and forth to check. Adjust to the best shifting for every cog except the largest. Now go down one gear at a time. If slow shifting, turn barrel adjuster 1/4 turn clockwise. Indexing is know complete.
Set the L-limit screw to the largest rear cog. Make it to tight then back up slightly until it is just right. Shift to the next smaller chain ring in the front and the second largest cog in the rear. Now shift to the largest cog.
Over tighten the L-limit screw. Turn it clockwise in 1/2 turn increments, shifting back and forth until it is to tight. Now turn the L-limit screw 1/4 turn counterclockwise and shift again. Continue until it is right, shifting quickly and without excessive noise. The lower limit is now set. As a check put extra pressure on the shifter. The cage should not move inward (toward the spokes).
The B-screw adjusts the spacing of the guide pulley to the cog. Put the chain on the smallest chain ring in front and the largest cog in the back. Mountain bikes usually want a 5 or 6 mm gap. Use 5 or 6 mm hex wrench to measure. This is not critical and if the bike shifts smoothly it is already set.
To increase the gap tighten the B-screw. To decrease loosen the B-screw. Double check the indexing after adjusting. You're are done.
Now ride and test it. If slow shifting or noise show up you may need to turn the barrel adjuster or limit screws another 1/4 turn.
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