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Next: measure the dip in your own curve
The drawdown calculator takes the depth of a fall and shows the gain needed to recover and how long that takes.
What is included
- What it is, in plain words
- The formula or mechanism, with exact arithmetic
- How it hits grid, martingale and DCA bots
- A check you can run before you switch a bot on
Who it is for
- People who run or plan to run a trading bot
- Anyone reading a backtest or a bot sales page
- Readers who want the numbers, not the pitch
- Not advice, and not a signal service
Key facts
- An equity curve plots the value of an account, usually after each trade or each day. It shows the path, not only the end.
- Read four things: the slope (how fast), the steadiness (how bumpy), the drawdowns (how deep and how long) and whether the line includes open trades.
- In the made-up example below the same 20 trades, in two orders, end at the same $1,210, but one has a maximum drawdown of $40 and the other $180.
- A smooth, steep curve proves little on its own. Martingale and grid bots draw smooth lines until the rare large loss arrives.
- A curve built from closed trades can hide open floating losses. Equity, which includes open trades, is the line that matches the real account.
What an equity curve is
Start with the opening balance. After each trade, add its profit or subtract its loss, and plot the new total. Join the points and you have the curve. A backtest report draws it from the simulated trades. A live account draws it from the real statement.
It answers a question a single summary number cannot: what was the ride like? Two strategies can finish on the same balance and feel nothing alike. The curve is where that difference shows.
Balance, equity and what they include
- Balance counts closed trades only. It jumps when a trade closes and stays flat in between.
- Equity is balance plus the floating profit or loss on open trades. It moves every tick.
The two lines can look very different for a bot that holds losing trades open, such as a grid or a martingale. The balance line keeps climbing on closed wins while the equity line sags under the open stack. A report that shows only balance can look calm while the account is deep in a hole. Always check which line you are looking at. The gap between the two lines is also what a margin call or a prop-firm loss rule measures.
How to read the line
- Slope. How fast the line rises. A steeper line means a bigger average result per trade or per day, or more risk taken per trade. It does not say which.
- Steadiness. How far the line strays from a straight trend. A tight line has small swings around its trend. A ragged one has large swings, even if it ends in the same place.
- Drawdowns. The dips below the previous high. Their depth and length matter more than the end value. See drawdown.
- Steps. A few big jumps up or down mean a few trades are doing most of the work. Remove the best one and see what is left.
- Flat stretches. Long periods of nothing can mean the strategy only works in one kind of market, or that the bot was waiting.
- Trade count. A beautiful line from 20 trades is far weaker evidence than a rougher one from 2,000.
A worked example: same trades, different order
This is a made-up record of 20 closed trades on a $1,000 account: 10 winners and 10 losers, $390 of gross wins and $180 of gross losses, so $210 net. Order A is the order the trades happened to arrive. Order B takes exactly the same trades and puts every loser first.
| Measure | Order A (mixed) | Order B (losers first) |
|---|---|---|
| Ending balance | $1,210 | $1,210 |
| Lowest point | $1,000 | $820 |
| Maximum drawdown, dollars | $40 | $180 |
| Maximum drawdown, percent of the peak | 3.6% | 18.0% |
Calculated by us on 29 Oct 2026, exact for these made-up trades. Nothing about the trades changed, only their order. Both orders earn $210. Order A never falls more than $40 below a previous high. Order B drops $180 before it recovers, which is 18.0 percent of its peak, because all the losses arrive together. Real trades do cluster: losers follow each other in a bad market. This is why a report with one equity curve is one possible history, not the only one. The Monte Carlo simulator shuffles a trade list like this thousands of times to show the spread.
How it hits bots
- Martingale bots draw a near-perfect staircase of small wins, then one vertical drop. The long smooth stretch is real. It is also what made the bot look safe. See martingale.
- Grid bots show a rising balance while the equity line carries the open stack. Ask for the equity curve, not the balance curve.
- Curve-fitted EAs draw a lovely line over the test period and go flat or fall just after it. The end of the test is where to look. See overfitting.
- Costs. A curve with no spread, commission or slippage is steeper than the one the account would draw.
How to check an equity curve
- Is it balance or equity? Does it include floating losses and margin?
- How many trades are in it, and over what period? Did the period include a trend, a crash and a quiet stretch?
- Does it cover data the settings were not tuned on? See walk forward testing.
- What happens to the line if the best 5 percent of trades are removed?
- Is the live curve, if there is one, drawn from a statement you can inspect, or from a screenshot?
What it does not tell you
An equity curve is a record of one path. It does not show the trades that could have gone differently, the risk that was taken to make the line steep, or what happens in a market the period did not contain. A straight line up looks like skill. It can equally be a strategy that sells rare disasters for small steady income, and it will look the same until the disaster arrives. Use the curve with expectancy, drawdown and a sample large enough to mean something.
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FAQ
Frequently Asked Questions
What is an equity curve?
A line showing account value over time, usually after each trade or each day. Backtest reports and live statements both draw one.
What is the difference between a balance curve and an equity curve?
Balance counts closed trades only. Equity adds the floating profit or loss on open trades. For bots that hold losing trades open, the equity curve is the one that matches the real account.
Is a smooth equity curve a sign of a good bot?
Not by itself. Martingale and grid bots draw smooth lines until a rare large loss. Check the number of trades, whether floating losses are included, and what the worst case could be.
Why can the same trades make different equity curves?
Because the order matters. Losses that arrive together cause a deep drawdown, and the same losses spread out cause a shallow one. Both end at the same balance.
What should I look at first on an equity curve?
Check whether it is balance or equity, how many trades it contains, and whether it includes costs. Then look at the deepest and longest dips, not the end value.
Are the numbers on this page real?
Example numbers are made up to show how the maths works, and the page says so. A figure only counts as exact when the page says it was calculated on a stated date. Nothing you enter in a calculator leaves your browser.
Can I use this to decide whether to run a bot?
It can show whether a bot's numbers hold together and how much an account can lose. It cannot say what the market will do, and it is not advice. Use it to ask better questions, then read the terms of your own broker or exchange.
Is this financial advice?
No. It explains how to read a chart in general terms. The example trades are made up and nothing here predicts any real result.
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