Equity curve - What you need to know about great equity curves

#equitycurve #tradingstrategy #tradingstrategies #trading #curvefitted #shorts

The equity curve is the most simple, but yet effective tool for validating your trading strategies. There are plenty of tools and metrics to validate (or not validate) a trading strategy, like the profit factor and the Sharpe Ratio, but the equity curve should always be the first one you look at.

The equity curve shows your starting capital plus the accumulated profits of the trading strategy. The slope of the equity curve should be rising gradually from the left to the right without any major drawdowns.

However, it should not be one that is very straight as it may indicate a curve-fitted strategy. A curve-fitted strategy is unlikely to work well going forward.

If you want to go into more detail about the win rate, please have a look at our article on our webpage.

More about Win Rate in trading:
https://www.quantifiedstrategies.com/equity-curve/

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