--- title: "Building Your First Systematic Strategy | RupeeCase Learn" description: "Universe selection, signal design, portfolio construction, cost modelling, and going live. A complete walkthrough of building a systematic strategy from." source_url: "https://www.rupeecase.com/learn/path-2/module-2-5-building-your-first-strategy" --- Skip to main content [Learn](/learn)›[Path 2: Systematic Investing Fundamentals](/learn/path-2)›Module 2.5 # Building Your First Systematic Strategy Everything from Path 2 in one place. Universe, signal, sizing, costs, backtest, going live. A complete walkthrough of how a systematic strategy is actually built from scratch. TK Tanmay Kurtkoti Founder & CEO, RupeeCase · QC Alpha ⏱ 16 min read ⟳ Updated 15 Jun 2026 ◆ Intermediate You’ve covered a lot of ground in Path 2. You know why rules beat gut feeling (2.1). You understand the five major factors (2.2). You can read risk metrics (2.3) and evaluate a backtest honestly (2.4). Now it all comes together. This module walks through the complete process of building a systematic strategy from scratch, every decision you need to make, the tradeoffs involved, and what it looks like in practice on RupeeCase. By the end, you’ll have a clear mental model for strategy design that applies to everything from a simple momentum screen to a sophisticated multi-factor portfolio. ## The five decisions in every systematic strategy Every systematic equity strategy, no matter how simple or complex, requires five design decisions. Get these right and you have a strategy worth backtesting. 1 Universe: which stocks are eligible? The universe defines your opportunity set, liquidity profile, and benchmark. Most systematic strategies use a liquidity-filtered index universe. RupeeCase default: **Nifty 500**, 500 stocks across large, mid, and small cap, all with sufficient daily liquidity for retail portfolio sizes. More factor opportunities than Nifty 50, more manageable than the full NSE universe. 2 Signal: how do you rank stocks? The signal is the factor, the measurable characteristic that ranks stocks from most to least attractive. Momentum: rank by 12M-1M return. Value: rank by P/B or P/E. Quality: composite of ROE, D/E, earnings stability. The signal must be **objective** (same calculation for all 500 stocks), **historically documented** (not invented for this backtest), and **available at decision time** (no look-ahead bias). 3 Portfolio: how many stocks, how weighted? Tradeoff: fewer stocks = higher potential alpha, higher volatility. More stocks = smoother ride, lower tracking error. For most retail investors, 20 to 30 stocks is the right balance. **Equal weight** (1/N each) is simplest and most robust. Volatility-weighted (inverse volatility) typically improves Sharpe. Market-cap weighting defeats the purpose of factor selection. 4 Rebalance: when and how often? Tradeoff: more frequent = fresher signals, more trading costs. For most retail investors: **monthly** for momentum (signals decay quickly), **quarterly** for value and quality (signals are slower-moving). Weekly adds significant cost for small portfolios without proportional benefit. 5 Cost model: what are realistic costs? Every trade costs brokerage + STT (0.1% both sides) + exchange charges + GST + stamp duty + slippage. RupeeCase uses **0.5% round-trip**, this covers all charges plus estimated slippage. A backtest that uses 0.05% round-trip is hiding 90% of real costs. ## A complete strategy specification Here’s what a properly documented strategy specification looks like. Every decision is explicit. Nothing is ambiguous. Strategy Specification Simple Momentum, Nifty 500 UniverseNifty 500 (point-in-time constituents) Signal12M-1M trailing price return SelectionTop 30 stocks by momentum rank WeightingEqual weight (1/30 each) RebalanceFirst trading day of each month Cost assumption0.5% round-trip per trade BenchmarkNifty 500 TRI This specification is complete. Any programmer given this document would build exactly the same strategy. That’s what systematic means, no ambiguity at execution time. ## Evaluating your backtest honestly | What to check | What you want to see | Red flag | | --- | --- | --- | | CAGR vs benchmark | Consistent 8 to 15% alpha over full period | Alpha concentrated in 1 to 2 exceptional years only | | Max drawdown | < 40%, recovery within 18 months | Deeper drawdown than benchmark; multi-year recovery | | Sharpe ratio | > 1.0 over 5+ years | Sharpe > 2.5 on long-only equity | | Annual performance | Positive alpha in most years | Alpha only in 1 exceptional year | | Parameter sensitivity | Similar results at 9M, 10M, 11M, 12M lookback | Only 12M works; 11M collapses | | Cost impact | Net returns still attractive vs benchmark | Gross attractive; net mediocre | ## The most important thing: stick to it I’ve spent most of Path 2 on the intellectual work of strategy design. But in 17 years of trading, the biggest source of return destruction I’ve observed isn’t bad strategy design. It’s good strategy design abandoned at exactly the wrong moment. Every momentum strategy has stretches, sometimes 6 to 12 consecutive months, where it underperforms the index. The portfolio is doing everything right: buying the highest-momentum stocks, rebalancing consistently. But momentum is in a “crash phase” and the strategy is down 20% while the market is flat. This is when most investors abandon the strategy. And it’s almost always the worst time to do so, the subsequent recovery is often sharp. The investors who stick with the process through the bad periods capture the good ones. **The process is the product.** A systematic strategy only delivers its stated returns if you follow it consistently. If you override it every time it underperforms, you don’t have a systematic strategy, you have a discretionary strategy with systematic window dressing. Before deploying real money, answer honestly: what is the maximum drawdown I can actually hold through without overriding the system? Choose a strategy whose historical max drawdown is below that number. That is your real constraint. [NSE, Transaction Charges Schedule (for cost modelling)](https://www.nseindia.com/trade/charges) [NSE Indices, Nifty 500 (benchmark and universe reference)](https://www.niftyindices.com/indices/equity/broad-based-indices/nifty500) ◆ What you’ve built in Path 2 You now have the complete intellectual foundation for systematic investing. You know why rules work (2.1), what factors drive returns (2.2), how to measure risk honestly (2.3), how to read a backtest without being deceived (2.4), and how to design a strategy from scratch (2.5). **That’s more than most active fund managers formally learn.** Path 3 goes deeper on each individual factor with Indian market evidence. [The terminal](https://invest.rupeecase.com) is where you apply it with real data. Apply everything you’ve learned Build, backtest, and deploy systematic strategies on NSE data Momentum, Quality, Value, live strategies + backtest tools + factor screener. [Start free →](https://invest.rupeecase.com/signup) TK A note from the author The real edge isn’t the strategy, it’s the discipline I’ve built dozens of systematic strategies over the years. The honest truth is that many well-designed strategies produce similar returns over long periods. The factors are known. The evidence is public. What separates investors who actually capture factor premia from those who don’t isn’t strategy sophistication. It’s discipline during the months when the strategy feels broken. It’s resisting the urge to “just this once” override the signal because conditions feel different. It’s staying in a momentum strategy through a momentum crash. This is genuinely hard, much harder than understanding the academic research. RupeeCase is designed to make the process as friction-free as possible, because the easier it is to follow your strategy, the more likely you are to actually do it. TK Tanmay Kurtkoti Founder & CEO, RupeeCase · 17 years systematic trading · QC Alpha RC **Apply what you’ve learned.** Build, backtest, and deploy systematic strategies on NSE data inside the RupeeCase terminal. [Explore terminal →](https://invest.rupeecase.com) Glossary, Module 2.5 UniverseThe set of stocks eligible for selection by the strategy. Typically a liquidity-filtered index like Nifty 500. SignalThe factor metric used to rank stocks | e.g., 12M-1M momentum, P/B for value, ROE composite for quality. Equal weightingAllocating the same capital to each stock in the portfolio (1/N). Simplest and most robust weighting for most factor strategies. Volatility weightingAllocating inversely proportional to each stock's volatility | giving higher weight to less volatile stocks. Typically improves Sharpe ratio. Strategy specA complete, unambiguous written definition covering universe, signal, portfolio size, weighting, rebalance frequency, and cost assumptions. Parameter sensitivityTesting how strategy performance changes across a range of parameter values. Robust strategies produce similar results across reasonable adjacent values. #### Sources & further reading * → [NSE India, Transaction Charges Schedule](https://www.nseindia.com/trade/charges) * → [NSE Indices, Nifty 500 (universe and benchmark)](https://www.niftyindices.com/indices/equity/broad-based-indices/nifty500) * → [SEBI, Portfolio Management Regulations](https://www.sebi.gov.in/legal/regulations/mar-2013/sebi-portfolio-managers-regulations-2020_46204.html) * → Ilmanen, A. (2011). *Expected Returns*. Wiley. * → Asness, C., Moskowitz, T. & Pedersen, L. (2013). *Value and Momentum Everywhere*. Journal of Finance. ©All content on this page is original work by Tanmay Kurtkoti and QC Alpha Technologies Pvt Ltd. Protected under Indian copyright law. tanmay@rupeecase.com 🎉 Path 2 Complete Systematic Investing Fundamentals You’ve completed all 5 modules. Take the path test to unlock your certificate. Take Path Test → [Explore All Paths](/learn) ### 🎓 Path 2 Test, Systematic Investing Fundamentals 30 questions across all 5 modules. Pass 21/30 to unlock your certificate. 30 Questions Pass: 21 / 30 Unlimited attempts This test covers everything in Path 2: why rules outperform discretion, the five major factors, six risk metrics, backtest evaluation, and strategy design. You’ve read the modules, now prove it. Questions are drawn from all five modules. You need 21 correct to pass. No timer. Start Path Test → 🎉 Path Test Passed! Great score. Enter your details to generate your certificate. Fill in the form below to receive your Path 2 certificate → 📚 Not quite Review the modules and try again. No limit on attempts. Try Again → 🎓 Generate Your Certificate Enter your name and email. We’ll record your completion and generate a downloadable Path 2 certificate. Your Name Email Address ✓ Registered! Your certificate is ready below. Generate My Certificate Your email is used only to record your course completion and send your certificate. No spam, no marketing. Unsubscribe anytime. 🎓 Path 2 Certificate Your Path 2: Systematic Investing Fundamentals certificate is ready. Download it as a PNG to share on LinkedIn. ⬇ Download PNG Close ### Quick check, Module 2.5 0 correct · 0 answered ✓ Module complete! Next module unlocked. 🎉 Module 2.5 complete 3 correct. Take the path test to earn your certificate. 🎓 Spread the knowledge Path 2 complete, help someone else learn systematic investing. This course is free. 📋 Suggested LinkedIn post Just completed Path 2 of Tanmay Kurtkoti's free systematic investing course on RupeeCase. Five modules covering why rules beat gut feeling, the five major factors, risk metrics, backtesting, and strategy design. The most useful investing education I've found. Free at rupeecase.com/learn Copy text Share on X Post on LinkedIn Copy link Research Lab Qualifier Path 2, Module 5 of 5, take path test to unlock [Explore terminal →](https://invest.rupeecase.com) ✅ 2.1 Rules vs Gut→ ✅ 2.2 Factors→ ✅ 2.3 Risk Metrics→ ✅ 2.4 Backtesting→ 📍 2.5 Build a Strategy [← Previous](module-2-4-how-backtesting-works.html) Previous, Module 2.4 How Backtesting Works Calculator ### Backtest Sufficiency Check A backtest is honest only if its sample includes enough independent regime cycles. This sanity check tells you whether the statistical claim is credible. Backtest period (years)Strategy holding period (months)Average bull / bear cycle (years) 🎓 Path 2 complete, what’s next Explore All Learning Paths Factor Investing Deep Dive (Path 3), Portfolio Construction (Path 4), Advanced Quant (Path 5), and more. [Explore Paths →](/learn) PRACTICE WHAT YOU LEARNED Try systematic strategies on RupeeCase | free paper trading. 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