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c12 JWBK182-McDowell April 25, 2008 16:15 Printer: Yet to come
128 A TRADER’S MONEY MANAGEMENT SYSTEM$37,000Annual Equity Curve For 12 Months$36,000
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0123456789101112Equity CurveFIGURE 12.17 Perfectly Smooth Annual Equity Curve (Hypothetical Figures).is, the less desirable it is. Therefore the goal is to minimize drawdowns as
much as possible and maintain an even and steady curve upward.
On Figure 12.18 there is a more normal equity curve, more ragged than
Figure 12.17. This graph shows you the equity curve my student plotted for
the year 2007 for the paper trades he completed. Refer to Figure 12.1 to see
his Annual Trade Ledger with running net profit and loss numbers which
have been plotted on the Figure 12.18 graph. Here you can see graphically
where the drawdowns occurred and where the winning periods occurred.
It is a valuable exercise and once you have performance data you should
plot your own numbers to create an illustration of your progress.REAL-LIFE EXAMPLES ARE A STARTING
POINTThese real-life examples from my trading student should give you a starting
point to begin using your trading records in a way that will reveal otherwise
invisible information. Capturing the information is the first goal, and know-
ing what to do with the information is the second goal. All in good time, the
process will naturally unfold as you work through it.