Martin Luther, in the Small Catechism, instructs us to make the sign of the cross while invoking the name of the Triune God. In the morning, as soon as you get out of bed, you are to make the sign of the holy cross and say: God the Father, Son, and Holy Spirit watch over me, Amen. (Book of Concord, Kolb/Wengert edition, p.363:1) He also states we should do the same in the evening when we go to bed.
It is important to note that making the sign of the cross on oneself is not a blessing. It is a remembrance of our Baptism, done in the name of the Father, Son, and Holy Spirit. During our Baptism the pastor made the sign of the cross upon our foreheads and upon our hearts to mark us as one redeemed by Christ the crucified (Lutheran Worship p.199). The sign of the cross is also an outward sign visible to others indicating that we are followers of Christ, the One who suffered and died on the cross, and that we have been cleansed of our sins through the waters of Holy Baptism.
Personally, I make the sign of the cross whenever the name of the Trinity is spoken or sung during the worship service or in prayer. I make the sign at the Invocation at the beginning of the service, during the speaking or singing of the Gloria Patri, while singing hymns where the name of the Trinity is mentioned, and also at the beginning of sermons that I preach. It is also appropriate to make the sign at the third article of the Creed, either Apostles or Nicene, and also at the reception of holy communion. For me, it is a way to remind me of the One who created me, who redeemed me, and who sanctifies me. It helps me to know whose presence I am in and who I am worshipping. Yeah, I know, it seems a bit pietistic. But there is nothing wrong with a little personal piety. Its when one tries to make it a means of grace that we get into trouble.
The sign of the cross seems to have begun in the East in the ancient church and moved westward. While the earliest forms of the practice involved simply tracing the cross on ones forehead with the thumb, the earliest documentation of the larger sign dates to the 9th century. The position of the fingers varies, from the use of just two fingers symbolizing the two natures of Christ, to two fingers and the thumb together representing the Trinity, to the whole hand with the fingers and thumb close together. The sign is made by first touching the head, then the breast, and then the shoulders.
The earliest form of making the sign of the cross is to touch first the right shoulder and then the left. This is not only the natural movement of the right hand, but it also places the hand over the heart at the end of the sign. After touching the left shoulder, many will strike their breast with the closed fist as a sign of humility, as did the tax collector in Luke 18:13, God, be merciful to me, a sinner. The Roman Catholic practice is to touch first the left shoulder and then the right. This indicates that Christ came down from the Head to the earth, passed through Hell in His passion (left) and then ascended into glory (right).
Another form of the sign that I do is done just before the reading of the Holy Gospel. I will trace the cross upon my forehead, lips, and heart. This practice I learned long ago from my mother. She told me that while I do that, I should say, Lord, may Your word be forever on my mind, on my lips, and in my heart. These signs of the cross carry no special power or ability. They do not save or forgive sins, nor do they ensure eternal life. They, for me, are simply reminders of Him who is my savior, who suffered and died to forgive my sins, and who ensures me of life eternal simply and wholly by grace through faith.