Equity Curve Feedback: Trading Your Results
Uses the shape of your equity curve to decide whether to continue trading fully or reduce exposure.
What is Equity Curve Feedback?
Equity curve feedback treats your performance history as a trading signal itself. If your equity curve is above its moving average, your edge is working—trade normally. If below, something may be off—reduce exposure or pause. This meta-strategy helps you trade aggressively when in sync with the market and defensively when out of sync.
Key Principles
Equity curve tracking: Plot your cumulative P&L over time. Moving average filter: Apply an MA to your equity curve. Above = green light: Trade normally when equity > MA. Below = yellow/red: Reduce or pause when equity < MA. Objective feedback: Removes emotion from the equation.
Implementing the System
Track your running P&L after each trade. Apply a simple moving average (20-50 periods works for most). When your equity is above the MA, trade with full position sizes. When below, reduce to half size or less. Some traders stop trading entirely when significantly below the MA, only resuming when the equity crosses back above.
Why This Works
Markets go through regimes. Sometimes your strategy is perfectly aligned; sometimes it's out of sync. Equity curve feedback automatically detects when you're in sync (making money) versus out of sync (losing money). Rather than guessing when conditions have changed, you let your actual results tell you. It's a humble acknowledgment that the market is the final judge.
Practice Risk-Free
Master these concepts with paper trading before risking real capital.
Start Paper TradingDisclaimer: This article is for educational purposes only and does not constitute financial advice. Trading involves significant risk of loss. Cryptocurrency investments are volatile and high-risk. Always do your own research before making any investment decisions.