Equity Curve
A chart plotting account balance over time across all trades, showing the overall trajectory and drawdown periods of a trading strategy.
The equity curve is a line chart of cumulative account value plotted against time or trade number. It is the most visually immediate way to assess a strategy: a smooth, upward-sloping curve with shallow drawdowns is the goal.
Many systematic traders use the equity curve itself as a signal — trading at reduced size when the curve is in a downtrend (below its own moving average) and full size when trending up. This meta-rule reduces drawdowns during system degradation.
Related Terms
Calmar Ratio
A risk-adjusted return measure dividing annualized return by maximum drawdown, rewarding strategies that grow without deep equity dips.
IntermediateDrawdown
The peak-to-trough decline in account equity from a high point to the subsequent low before a new high is reached.
BeginnerExpectancy
The average dollar amount you expect to make per dollar risked, calculated from your win rate and average win/loss sizes.
IntermediateMaximum Drawdown
The largest peak-to-trough equity decline recorded over a strategy's full history — the worst-case loss an investor would have experienced.
IntermediateSharpe Ratio
Return per unit of total risk — how much reward you earn for each unit of volatility taken. Higher is better.
IntermediateTrade Journal
A systematic record of every trade including entry, exit, size, reasoning, and outcome — the primary tool for improving a trading edge.
Beginner