A rules-based strategy specifies the conditions under which trades are placed. These include the stock universe, entry and exit criteria, and position-sizing rules. The stock universe determines which stocks can be considered for a trade.

For an index-based stock strategy, the historical composition of that universe also matters: which stocks actually belonged to the relevant index when a historical trading signal occurred? Accounting for membership at that point in time is part of a properly constructed backtest.

To use a system, you also need to understand the trading routine. How long are positions typically held? How many can be open at once? When do you need to take action? These details help you assess the workload and risks involved.

When you develop your own system, you define its rules, obtain and check historical data, and study how the rules behave in backtests. Implementing it also means deciding how a planned position becomes an order in your brokerage accountA broker is a securities dealer who executes transactions on the stock exchange on behalf of a client..

With an existing system, that development work has already been done. Before using it, you should understand how it was tested and which tasks remain yours in day-to-day trading. With EGS, the software prepares the trades; you review and approve them yourself.

Assessing a stock strategy includes understanding how its results were produced. Two important criteria are the historical stock selection and the stability of the rules when parameters change.

Historical index membership and survivorship bias

Using today's index constituents for a backtest covering many years can distort the results. Companies that have since left the index are missing, while stocks added later may be included too early in the historical test. Looking only at the companies that survived is known as survivorship bias. This can make an equity curve look better than it would have with the stock universe available at the time. The QuantConnect research guide also explains this issue.

In our Equity Growth System backtests, we include only stocks that actually belonged to the strategy's index at the time of each signal. What matters is their index membership at that point in history.

Few parameters and checks for curve fitting

Curve fitting means adapting rules so closely to historical data that they also capture its random noise. A useful robustness test therefore examines how results change under different parameter settings. The IBKR Campus webinar on backtesting discusses the importance of such checks.

For EGS, we use robust stock strategies with few parameters. Even substantial changes to individual parameters would have left them profitable in the historical tests. This is an important feature of our approach: its results do not depend on a single finely tuned set of parameters.

Lab of Trades → TitanEquity Growth System

The Equity Growth System is a rules-based approach to swing trading in stocks. Its rules are calculated internally. You can execute the resulting trades through Lab of Trades in your own brokerage account. You will find the Equity Growth System in Titan, its stock trading module.

The TradeNeon team has carried out the development work for these systems. The rules produce prepared trades that you can review and execute independently. In the software, you see the model portfolio with its positions and upcoming changes.

Positions are typically held for one to ten trading days. This is swing trading with positions held overnight. Price gapsWhen the closing price of a chart candle and the opening price of the next candle differ, a price gap arises between them. following news outside trading hours are among the risks of this approach.

To trade the system, you need a brokerage account enabled for US stock trading and Trader Workstation, or TWS. You also need Lab of Trades on your Windows, Mac or Linux computer.

The trades are available before the US market opens. You review them, manually approve each trade and send the orders from Lab of Trades to your TWS. The planned entry then takes place at the market open.

You can complete the approval beforehand, so you do not need to be at your screen at the exact opening time. Semi-automated means that the software prepares the trades while your approval remains necessary for each one.

Our team has traded these systems in their current form in its own real-money accounts for many years. This practical experience complements the historical tests and checks of the trading rules.

The curves shown on the EGS product page are labelled as historical backtests starting in 2000. They apply the rules to historical price data and include standard IB trading fees.

The equity curve shows the simulated performance. Below it is the drawdown: the decline from the previous peak. Together, they show how capital developed during the test and the setbacks along the way. The largest historical drawdown is not a limit on future losses.

In the chart below, you can switch between sizes S, M and L and view different parts of the test period. The accompanying notes explain how the results were calculated.

Past results from backtests and real-money trading are not a reliable indicator of future results.

Each larger tier adds further systems and stocks. The sizes therefore differ in their underlying trading rules as well.

Alongside the backtests, consider the included strategies and the number of possible open positions. A larger package does not automatically mean a smaller drawdown.

If you already trade your own strategies, you can assess another systematic approach as a complement. The same applies to a long-term portfolio that you want to supplement with an active component. The practical benefit of an existing trading system is that you do not have to develop this additional approach yourself.

The EGS systems remain US stock strategies. How much additional diversificationThe term diversification refers to the spreading, or allocation of assets across different investment types, industries or economic regions. they offer depends on what you already trade and how the approaches behave together. More systems do not automatically mean less overall risk.

The Equity Growth System page provides the sizes, full backtests, requirements and subscription prices. In his German-language video about the Equity Growth System, Oliver explains the workflow and compares the sizes.

To get to know the software, you can use Lab of Trades on the Free Plan, including Smart Entry Equity on Mondays. The Equity Growth System itself is a separate paid subscription.