Slow Down: Equity Curve Ahead by Robert Cocchiola
This One Is Just Right!
The equity curve judges the success or failure of your system. What makes an equity curve good or bad? What does it take to achieve a good equity curve? We’ll take a look.
Technical analysis can lead to successful trading, but only if you have a good equity curve. A good equity curve, like a bad one, is constructed from various parts of your project. The success or failure of your efforts will be revealed in the equity curve, which is the ultimate judge of your creation. Success in trading is not found in the final value of the account.
What makes an equity curve good is the way it indicates steady growth in your account without scary pullbacks. What makes an equity pullback scary? It causes loss of sleep. Your eyebrows start to fall out. You can’t eat because everything tastes like week-old flounder. But most of all, it makes you stop trading and want to kill the friend who convinced you that daytrading was a swell idea for a person as smart as you.
To help avoid those little unpleasantries, here are a few steps you can take.