What A Real Traders Equity Curve Should Look Like.

I think what throws off a lot of traders when they get started is that they believe their account should just rapidly go up and they don't have any drawdowns and they just have 100 or 200% returns. Now, that's not the reality of trading. So in this video, I want to break down the real way an equity curve of a true professional trader should look like, right? Because there's a lot of, you know, crazy stuff out there. Hey, learn how to make 100% in a day, in a week, and so on. And I just don't think that's a realistic approach you want to put in your head. So I think before you get started, or even if you are trading at this moment, you need to understand how a real equity graph should look like and how to actually implement it. And that's what I'm going to break down in this video.

So this right here is the first chart. So this is where you start out. Let's say you start out at your profit or loss is at $0. We're not even going to put a number on it, right? So your profit and loss start going something like this. One trade.

Two trade, second trade, third trade, fourth trade, fifth trade, and so on. So basically, when you look at it from a larger perspective, your chart or your equity curve is all over the place right? Now, for some people, this is how they trade. But what happens when you zoom out of this chart and you look at it from a bigger perspective, right? And let's say that's all zoomed out, it looks something like that, okay? It's all over the place. And these are the traders that have days like this, right? And I'm pretty sure a lot of you can really, really have the, the same understanding with these type of traders where you have days where, you know, you make 300, you make 800, you make 1500, right? You make 900. But then at the same time, right, you have days where you lose 900, you lose 3500, you lose 3000, 4200, right? So what happens here is obviously you don't have good risk management, right? But there's no consistency of losses and no consistency of wins. And this is where risk management plays a role, and this is where consistency plays a role. Because now if you had proper risk management, your losses would be equal, right? You wouldn't have a loss that's at 4200 at your max loss and your max gain at 1500, which is like 3x more than your max gain, right? That wouldn't cause your equity curve to look like that. Now, successful traders understand the power of consistency. They understand the power of risk management, and they understand a real account is going to have stallments, it's going to have consolidation periods, it's going to have rally periods, and these are things that come along the sides of actual trading. So this is how, in my opinion, a real trader's equity curve looks like and my personal equity curve. The first two years looked like what I just showed you. But then when I actually started implementing risk management and started understanding the game a lot better, right, it started looking like this. I would have a few good days and then when I would have bad days, I'd be able to control them, right? And then when I would have super bad days and I have a run of bad days, I'd be able to slow down and take a break where I wouldn't accelerate and dig myself a deeper hole. Then I would have weeks of consistency and growth and then obviously some drawdowns. And then my chart would keep looking like this. Now this is a slow growth chart compared to what I showed you, but this is consistency. And, and at the same time, on this chart, I'm now green for the year, for the month, for the week or whatever on the other chart, right? Immediate gains, losses taken away in a trade, made gains, made gains, losses, gain losses over and over again. So you're around a weird spot. Now, a successful trader's equity curve, in my opinion looks something like this, right? On a number basis. So on your gain, right, let's say you made 500, you made 100, made $87. 600. 1100, right. 400. Now, obviously some trades, you're barely going to be green just because you exited too early or you didn't like to trade. But then your losses. 180, 200. 140. 70. 205, right? 210. Now, if you look at this, the losses are capped out, right? They're at a certain point around 200. Around 200. Around 200. Sometimes you're cutting your losses a little bit early, sometimes a little bit early. But at the same time your losses are consistent, which are far less than your gains, right? And your gains are still also consistent. Right? Now, if you look at your max gain amount, which is 1100, and your max loss amount, which is 210, that's about five times more right than your max loss amount. And if you look here, there's consistency in making money here, there's consistency in losing money. And you want to See, consistency in the numbers because you're obviously going to lose money. It's not like you're not. But it's staying within your risk management plan. You're following the 2% rule, 1% rule, whatever, and you're hovering around that number. Now, what happens with some people is they get to a stage where this stays consistent accordingly to their account size and their risk management plan, which is great, but they mess up here on the profit side. So on the profit side, they may make 20 bucks, 80 bucks, 100 bucks, 10 bucks, 30 bucks. So they're controlling their risk, which is phenomenal. But the issue that these traders are having, which is pretty simple, is they're not allowing their winners to run. So since you're not allowing your winners to run, what typically happens is, yes, this is phenomenal. You're managing risk at a great pace, and that's good. But since you're not allowing your winners to run, right, that's making it harder for you to actually grow your account, right? So you got the first component down, but the second component, right, which is not letting your winners run, is making it harder for your account to grow. Because you'll have a few good trades and. And one bad trade is gonna bring you down. You'll have a few good trades, one bad trade's gonna bring you down. So a real trader's equity curve depends on a few factors. Number one is risk management. Like I mentioned, you have to protect your risk, and it has to be consistent, right? Meaning if your max loss per trade is 200, that's where your max loss should be at. It should be at $200 or below. You should not see your max loss in a trade go 200, 600, 510, 1,800, all this, that's all over the place. Second thing, once you get your risk going, you also need to understand, as a true professional trader, when you should be aggressive and when you should take a break. Because a trader's equity curve is not just gonna go up. You're not just gonna see that. You're not gonna fund an account tomorrow and become a billionaire in two days. That's not possible. But what can happen is you'll have weeks or a month or months or days where you have a lot of consistent growth and you're just on a hot streak. And it happens with a lot of traders. But then when that hot streak kind of dies down, right, and you're kind of pulling back, and now you're missing the trades, you're making bad trades, emotions are Stepping in or you're not finding your edge, or you're not able to execute your edge. This is where the speed that you were going here, let's say you were going at 100 miles per hour. You can't do that here, you can't go at the same speed here. Because if you go at 100 miles per hour here, meaning you're putting out the same amount of risk, you're being as aggressive, you're gonna come down just as fast, right? Because you now built up momentum to that opposite end. So what you want to do is when you get to these type of places and is you wanna slow your speed down and maybe go to 10 miles per hour and say, you know what, this is a week where or a month where I'm not performing at my best. So my job as a trader is not to make money here, but it's to stay alive. And in order for me to stay alive, I need to decrease my risk amount and I need to be less aggressive trading these, because if I'm less aggressive and I decrease my risk amount, I, I will be able to capitalize on this market a lot better. And you have to understand, guys, no position is a position. So even if your account equity for a month stays flat, that is 10 times better than you being crazy and being reckless and bringing your account value all the way back down and giving up all your profits plus more. And I'm pretty sure a lot of you can relate to this is where emotions really kick in and really destroy your account and bring it down very, very heavily, right? So during these phases, as a true, consistent trader, you wanna also understand when to be aggressive, right? When to take a step back and when to sit on your hands and not be aggressive during these times. Because that will save you a lot of money, right? For me personally, I've noticed when to be aggressive, when not to be aggressive, and when I'm not aggressive, I'm able to actually, really, really execute on the markets, you know, whatever the market's presenting. Meaning when the market's choppy and there's no plays, I know that me just staying flat on my account equity during those times is gonna benefit me a lot more than me still going at the same speed limit, right, that I was going at when I had a hot hand. Because. Because that's only going to destroy my account. So. Yeah. So understanding all of this is very important. Once again, just to recap everything, guys, if you really want to take trading seriously, you got to understand that this is a long game in order for you to be successful in the long game, you got to protect your downside. You got to understand this is a marathon, not a sprint. You don't want to run and exhaust all your energy or all your buying power or capital in one day or one trade you to want. You want to understand it as a marathon, not a sprint and take it one day at a time and build off that and understand when to be aggressive, when to take a break and understand all those fundamental truths that come with trading. And that's how you'll actually be able to take advantage of this great amazing career that I think that's presented for us and really capitalize on it the right way. If you guys have any questions, please follow my Instagram. I'm going to post my Instagram right here. DM me. I'll be answering any trading related questions at all there. Once again, if you like the video, please give it a thumbs up and subscribe to this channel and I'll see you next time. Thank you.