What is an equity curve?
In one line: An equity curve is a line chart of your account balance over time, usually after each trade, showing how your results add up.
A simple example
Start with $5,000 and risk $50 a trade (1%). Results in units of risk, called R:
| Trade | Result | Balance |
|---|---|---|
| Start | $5,000 | |
| 1 | +2R | $5,100 |
| 2 | −1R | $5,050 |
| 3 | −1R | $5,000 |
| 4 | +2R | $5,100 |
| 5 | −1R | $5,050 |
Plot the balance column and you have an equity curve. Up, down, up, down, slowly rising. A math example, not a promise.
What the shape tells you
- Rising with small dips: losses are kept small and winners are bigger.
- Steep cliffs: one or two trades did big damage. Usually a sizing or stop problem.
- Flat for a long time: the method may be roughly breaking even. See Breakeven.
- Jagged swings both ways: risk per trade may be too high or inconsistent.
The deepest dip from a peak is your Drawdown. It's one of the most useful numbers on the curve.
Why it matters
A single trade tells you almost nothing. The curve shows how your process behaves over many trades. That's the honest way to judge a method.
It also shows discipline. If the curve drops sharply after a run of losses, check your journal. Did size go up? Did trades get rushed? That's often Tilt.
A common mistake
Judging the method on 10 trades. A good process can have a losing streak, and a weak one a lucky run. Look at 50 to 100 trades, practised on past charts first, before deciding.
Plot your curve in R, not dollars, while you practise. It keeps the focus on the process instead of the money. Our free journal template has a column for it.
Learn to log trades in how to keep a trading journal, and check your numbers with the expectancy calculator.
Questions
What does a good equity curve look like?
Generally a slow rise with shallow dips. Smooth matters more than steep, because deep dips are hard to recover from.
Can I see my equity curve in a backtest?
Yes. Most backtesting tools, including TradingView's strategy tester, draw one. Remember that backtest results are hypothetical.
Should I stop trading if my equity curve drops?
Many traders set a rule, like pausing after a drawdown of a set size, to review the journal. Decide the rule before it happens.
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