Equity Curve
Equity Curve
The equity curve is the most important visual in backtest results. It shows how your account balance changed over time, revealing the strategy's behavior across different market conditions.
What It Shows
The equity curve plots your account balance (Y-axis) against time (X-axis):
- Starting point — your initial deposit
- Each step — balance change after each trade closes
- End point — final account balance
Reading the Shape
Ideal: Smooth Upward Slope
A consistent upward curve with small, brief pullbacks indicates a robust strategy that performs well across market conditions.
Warning Signs
| Shape | Meaning | Action | |-------|---------|--------| | Sharp spikes up then crash | Overfitting or lucky streaks | Add more conditions, test longer period | | Long flat periods | Strategy rarely trades | Lower entry thresholds or use shorter timeframe | | Staircase pattern | Wins clustered, then nothing | Check if strategy only works in certain regimes | | Steady decline | Strategy is losing | Reconsider entry/exit logic | | One big spike | Single trade drives all profit | Not reliable — need consistent returns |
Drawdown Zones
Drawdown periods are highlighted on the chart:
- Red shading below the equity curve shows drawdown depth
- Max Drawdown — the deepest trough (most loss from a peak)
- Drawdown Duration — how long it took to recover
Drawdown Formula
Drawdown % = (Peak Balance - Current Balance) / Peak Balance × 100
A max drawdown of 20% means the account lost 20% from its highest point before recovering.
Interpreting Results
Consistency Check
Compare the equity curve's early, middle, and late periods:
- Similar slope throughout — strategy is consistent
- Slope changes — strategy may be sensitive to market regime changes
- Best at start, worst at end — possible overfitting to early data
Comparison with Benchmarks
A flat line at the deposit level would mean "do nothing." Your equity curve should meaningfully outperform this baseline to justify trading.
Technical Details
- Balance updates at each trade exit (not entry)
- The curve includes effects of commission and slippage
- For grid/DCA strategies, balance updates when the entire position closes
- Timestamps are in UTC
Tip: A strategy that returns +50% with a smooth curve and 10% max drawdown is generally better than one returning +100% with 40% max drawdown. Consistency matters more than peak returns.
FAQ
Q: Why does the equity curve look different from the trade log P&L total? A: They should match. If you see differences, it's likely due to rounding in the visual display.
Q: Can I zoom into specific periods? A: The TradingView chart in the Charts tab allows zooming and scrolling through the price data with trade markers.