# Equity Curve

An equity curve is a graphical representation of the change in the value of a trading account over a time period. An equity curve with a consistently positive slope typically indicates that the trading strategies of the account are profitable, while a negative slope shows that they are generating a negative return.

## Breaking Down Equity Curve

Since it presents performance data in graphical form, an equity curve is ideal for providing a quick analysis of how a strategy has performed. Also, multiple equity curves can be used to assess various trading strategies performance and risk.

## Equity Curve Calculation

Assume a trader’s starting capital is \$25,000 and his or her first trade of 100 shares had an entry price of \$50 and an exit price of \$75. Commission on the trade is \$5

Starting capital = starting capital – ((entry price x qty of shares) - commission)

•  \$25,000 - ((\$50 x 100) - \$5)
• \$25,000 - (\$5,000 - \$5)
• \$25,000 – \$4,995
• \$20,005

Starting capital = starting capital – ((exit price x qty of shares) - commission)

• \$20,005 + ((\$75 x 100) - \$5)
• \$20,005 + (\$7,500 - \$5)
• \$20,005 + \$7,495
• \$27,500

Repeat the above process for each new trade.