An equity curve is a chart of a strategy's account value over time. It's one of the most common ways performance gets presented — and one of the easiest to misread. A steep, smooth upward line looks like skill. Sometimes it is. Sometimes it's a short time window, a lucky sample period, or simply too little data to mean much yet.
Five questions worth asking
- How long is the track record? A few months of live or backtested data says very little about how a strategy behaves across different market regimes.
- What was the worst drawdown, and how long did recovery take? This tells you more about real-world experience than the average return does.
- Is the return stream smoothed or does it show real volatility? Extremely smooth curves over volatile underlying markets deserve scrutiny.
- Is the data live-tracked or backtested? Backtests can be curve-fit to history in ways live performance cannot.
- What capital and time range is being shown? The same strategy can look very different depending on the window selected.
How we approach this on our own Strategies page
The equity curves on our Strategies page reflect our live-tracked performance, and the same scrutiny above should be applied to it as to any other track record you encounter.
This is educational content intended to help you evaluate performance data more critically. It is not investment advice, and past performance of any strategy — ours or anyone else's — is not indicative of future results.