A good thing to do over time is plot your equity curve. What you are looking for over time is a fairly smooth curve upwards. Having a crazy up and down curve means you are experiencing big losses and then big gains. You could either do an equity curve at set intervals, for example at the end of each week or month. Or just when you feel necessary. It could either be over a set period of time or over a number of trades.
Why Create an Equity Curve?
It is a lovely visual way to see your money building. And it can show you how your strategy is performing. It can also give you a confidence boost when it goes in the right direction, and can be a good way to see your progress over long periods.
My Latest Curve
For this post I have created my latest equity curve for my last 100 trades. Here it is.
Certainly not the prettiest but it goes in the right direction! Overall I am very pleased with it. Because as I recently mentioned I struggled at the end of November (that is the big dip that starts on the 85th trade). I’ve also tried new things out, such as letting the position hit the stop of limit. And I tried a couple of trading ideas on slightly longer time frames which didn’t go so well (hence the drop that starts on the 33rd trade). So to see a nice overall upswing in my funds, during a time when I have tested things and also struggled at times is very pleasing.
How to Make Yours
It can be easily done in an ‘Excel’ spreadsheet, or the OpenOffice equivalent which is called ‘Calc’. You simply highlight the data, click on ‘Insert’ and then ‘Chart’ and follow the instructions to choose the styling. How to do it may vary slightly based on the edition of Windows Office or OpenOffice you have. When you’ve done it once it becomes easier to do it again in the future.
If you use other software to record your trades I’m afraid I can help you out. But hopefully there is some kind of charting option. Get in the habit and make that curve go north!