Equity Curve

An equity curve is a graphical representation of the change in the value of a trading account over time. It shows the cumulative performance of a strategy, including both realized and unrealized gains and losses.

By analyzing the slope and smoothness of the curve, traders can assess the consistency of their performance. A steady, upward-sloping curve indicates a robust strategy, while a jagged curve suggests high volatility or poor risk management.

The equity curve helps in identifying periods of drawdown and recovery. It is a primary tool for backtesting and monitoring live trading performance.

Traders often look for drawdowns in the equity curve to determine when to adjust their risk parameters. It is the visual record of a strategy's success or failure in the market.