What Do Equity Curves Really Tell Us?

The following equity curve was taken from an EA that produced 717 pips in 150 days. It's one of the highest producing EA's in one of the many demo accounts that I am running.

 

However the interesting thing though is that if you look at the equity curve you will notice that there were two major drops of almost $700 or 700 pips.

What does this perhaps tell us?

That obviously sometimes our accounts may have to be able to withstand some major drops every now and then. And I must say that equity curve is not the prettiest because it is not diagonally straight up.

However, when you look at many trades over a longer period of time, the equity
curves smooths out and will appear to have a more diagonally straight up direction.

It 's like kind of zooming in and out so to speak.  When you zoom out over a longer
period of time, the major dips become little dips in the grand scheme of things.

Just something to think about. 

Now of course I am not saying that we can't have an EA that produces a smoother equity curve from the get go.  :-)

Or at least have a basket of EA's to smooth out the overall performance of your account.

And then thinking some more, why would we even need to have a smoother equity curve when what we really want is to be net positive.  I suppose it doesn't matter if the equity curve is smooth or not.  It may be something that the human mind is wanting to see....some type of law and order in a
rather chaotic random world.

I would to love to hear your opinion on this?

By the way, if you would like to know which automated forex trading robots I am using, please visit: ForexSystemsReviewed.com

Best regards,


Mike Torres
http://ForexHosting.com
http://MiamiForexClub.com
http://WealthSecrets.com
(305) 389-0170 cell