Glossary
Equity Curve
A line chart that shows the value of a trading account over time.
The equity curve visualizes the cumulative profit and loss of a strategy. A smooth, upward-sloping curve is ideal, while deep dips indicate drawdowns. It is one of the first things traders review after a backtest.
Key Points
- A rising equity curve with shallow drawdowns suggests a robust strategy.
- Flat or choppy curves may indicate weak edge or overfitting.
- Always compare the equity curve to a buy-and-hold benchmark.