Tutorial: Working with Multiple Stocks: View an Equity Curve

View an Equity Curve

i   Tutorial Task
Display an equity curve in a chart.

Signal analysis fields can be created and used in other locations than the Portfolio View. For example, signal analysis fields can be used in charts and calculations.

Let’s add a display of the equity from trading the Primary Signal to a chart of the price.

Step-by-step Instructions

1.    Select Display in Chart… from the context menu for “MBNA Cp” in the Portfolio View.

2.    On the Display Fields in Chart Dialog, select Select new fields to display.

3.    Select the “Close” field and press Add Selected Fields.

4.    Press the Create a New Field… button.

5.    On the Create a Field Wizard: Select Type page, select Analyze a signal and press Next.

6.    Review the introduction to the Create Signal Analysis Fields Wizard and press Next.

7.    Let’s display the trading equity for all of the data we have. On the Trading Parameters page, set the Analysis Range to “Since beginning of data”.

8.    Under Select Analysis Fields to Create, select “Account Equity” and press Add Selection.

9.    Press the Finish button.

10.  On the Display Fields in Chart Dialog, add the “Equity ( )” field from under “Signal Analyses”.

11.  Select to display the chart for the last one year.

12.  Press OK to view the chart.

13.  Notice that the scales of the two fields are different. The equity is in the thousands and the price is dwarfed in scale, so it appears as a line around 0.

14.  In previous tutorials, we placed fields with different scales in different sub-charts. However, since the price and equity should be related, lets look another option. Select Display as Percent Change from the context menu for the chart.

We can change the chart to display each of the fields as a percent change from the first date being displayed. To do this, select Display Fields as Percent Change from the context menu for either field in the chart. Both of the fields will be converted to this new format.

By displaying the fields on top of each other as a percent change, you can also compare two strategies to determine which one was more profitable during a given date range.

15.  Compare the percent change in the closing price to the percent change in the equity produced by trading the Primary Signal. The equity of effective signals will continue upwards even if the price decreases.

The equity curve displays the amount of equity that would have been generated by an entry/exit signal if it were being traded. This is the same information that is on the signal analysis page. However, rather than showing you the end result, the equity curve allows you to visualize how it arrived at the current equity.

Due to changing market conditions, this can be very important information. For example, an entry/exit signal may have been very profitable during the first 6-8 months it was traded, after which it may have stopped being effective. By looking at only the final profitability, this may look like an entry/exit signal that is currently profitable. However, by looking at an equity curve, you can see what periods generated the most profits.

This same type of information can be seen in numerical form by looking at the Signal Analysis page of the Modify Field Dialog for this field. Both the Equity by Trade and the Equity by Bar sub-pages display the equity, the change in equity, and the percent change in equity.

16.  When you are finished with the chart, click the x in the upper right-hand corner of the Chart View window to close it.

Congratulations, you have viewed the equity curve and compared the percent change of multiple values in a chart.