Equity curve

Balance changes only when trades close; equity moves with every tick of open positions. The equity curve is the honest one: it shows the drawdowns a holder actually lived through, not just the closed-trade summary.

Reading equity curves is a skill: smooth ascents with sudden cliffs often mean strategies that bank many small wins while occasionally holding large losses — a shape that can hide enormous risk behind a high win rate.

Covered in depth in Lesson 13: Win rate is a vanity metric. Expectancy pays the bills..

Related terms

Drawdown — The decline from an account's peak value to its subsequent low — the number that measures how painful a strategy is to hold.
Win rate — The percentage of trades that close in profit — meaningless on its own, informative next to the reward-to-risk ratio.

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