A graphical representation of an account's value over time, showing the cumulative impact of all trades.
An equity curve is a line chart plotting your account balance or equity over time. It's one of the most powerful tools for evaluating trading performance.
What a Healthy Equity Curve Looks Like
- Steady upward slope: Consistent growth over time
- Shallow pullbacks: Small, controlled drawdowns
- Smooth trajectory: Not a jagged rollercoaster
Warning Signs in Your Equity Curve
- Steep drops: Large drawdowns indicate position sizing or risk management issues
- Flat periods: Extended plateaus suggest the strategy may not be working
- Jagged volatility: Wild swings up and down indicate inconsistency
- Hockey stick (flat then sudden spike): Suggests the profit came from one or two lucky trades, not a repeatable edge
Equity Curve for Prop Firms
Prop firms look for traders with smooth, ascending equity curves because:
- It demonstrates consistent edge and risk management
- It suggests lower risk of sudden catastrophic losses
- It's more likely to continue than a volatile curve
How to Use Your Equity Curve
- Compare live vs backtest: If your live equity curve diverges significantly from your backtested curve, something is different (execution, psychology, market conditions)
- Identify regime changes: A previously rising equity curve that flattens or declines may indicate market conditions have changed
- Track in PropTally: Your dashboard shows your equity curve across all accounts, helping you spot trends and problem areas