The Equity Curve Technique - Trading Stocks - Trading Stocks Guide

The Equity Curve Technique - Trading Stocks - Trading Stocks Guide: "To create a 30-day rolling equity curve, simply read your net equity off of your broker's web site after the close (or, if you are carrying positions, mark all of them 'to market' at the end of every trading day) to enter an accurate 'Net Account Equity' figure into a spreadsheet. For multiple accounts / brokerages, simply add the account balances; or keep a curve for each account (and a 'rollup' curve).

There are many possible refinements to this, but the key idea is to plot your account value, marked-to-market if you carry positions overnight, every day after the market has closed and to plot / monitor this curve on a regular basis. Studying this curve daily is an essential psychological component of the EQT concept and is part of what makes it so surprisingly powerful, as explained below.

I recommend keeping the equity curve charted on a 30-day rolling basis. After updating the data, take five minutes to study the updated equity curve, which is essentially your trading performance, good or bad, plotted clearly on a chart. If you are interested in moving towards peak trading performance, then I recommend examining the chart carefully each time it is updated -- computing the slope; measuring the drawdowns, and in general lingering long enough to be sure the data you're looking at gets into your subconscious thinking. ...

Why can routinely keeping an equity curve and monitoring it closely make a difference in performance? There are a number of reasons, but I believe primarily it boils down to psychological feedback, on both the conscious and unconscious level.

You may notice as you start to use an equity curve that you feel under pressure to perform, and that you are less likely to take trading days off. Once you've acquired and mastered the key skills to trade successfully, with this kind of feedback you can push yourself as hard as you'd like.
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