Agar aap market me trading karte hain, toh aapne aksar suna hoga ke trading strategy ko on aur off kiya jaata hai. Have you wondered in absolute disbelief why we are talking about some financial decisions jaise wo kisi fan ka switch ho jo on aur off ho raha hai?
Well actually ye trading strategy ko on and off karne ka phenomenon is associated with the position of the equity curve.
Aaj is podcast me hum aapko batayenge ke equity curve itna important kaise aur kyun hai & why its position matters so much.
Let me start with telling you what an equity curve is. Waise toh naam se hi clear hai ke equity curve represent karta hai aapki equity ka movement - in broader terms, aapke trading account ka haal.
Equity curve aapke trading account ki value ko graph par trace karta hai - to study it over a period of time. Ab aap soch rahe honge ke equity curve ke zariye aapke trading account ke baare me janne ke liye uski shape important hogi. That is infact true. Jis tarah aap stock market me graphs ke ups and downs ko study karke prices track karte hain, usi tarah equity curve ki shape aapko aapke portfolio ki performance ka andaaza deti hai. Equity curve ke ups and downs aapke portfolio ke price movements dikhate hain.
Agla sawaal ye aaya hai ke agar equity curve hume itni insights aur information de sakta hai, toh usko use karke hum kaise behtar investment decisions le sakte hain?
That brings me to a very important part of understanding the equity curve, which is it's interpretation.
Agar aapke equity curve ka graph ka slope positive hai, yaani ki it shows a rising graph, this means that your trading strategy is yielding positive results. Well in that case, congratulations. Aapke investments aapko adequate return de rahe hain and your strategy is profitable. On the other hand, agar aapka curve negatively sloping hai, toh aapke saamne ek problem hai. Iska sole solution yahi hai ke aap turant apni trading strategy ko off kardein.
Ye decisions equity curve se lena aasaan hai. Kyuki humein visual dekh kar jaldi samajh aata hai - aapk equity curve par ek nazar daalkar ye jaan sakte hain ke kab aapki trading strategies pay off nahi kar rahin and then you can take fast action to avoid losses.
Aap apni investment aur trading strategy ko kayi pahluyon par jaanch sakte hain. These include Aapki investment ki timing Aapki trading strategy kitni aggressive hai Kya aapko trading strategy me zyada conservative aur kam risky hona chahiye.
Aur kya aapke saare investments ek hi sector me hain? Finally, equity curve ko dekhkar aap apni trading strategy ke liye ek solid decision le sakte hain: is phenomenon ko hum kehte hain ‘trading the equity curve’.
Here’s how it goes, step by step.
Sabse pehle, aap equity curve ko kuch mahinon ke liye study karte hain. Baat aisi hai ke no matter how aggressive or well-timed your trading strategies are, equity curve WILL have ups and downs. Ye ups aur downs winning aur losing periods hote hain aur market volatility ki wajah se, they are bound to occur.
So, equity curve ke concept ko use karke aap ek guiding rule bana sakte hai - this rule will guide you on when to stop or start your trading strategy. Iske liye you can make use of the moving averages.
For example, aap trading guideline set kar sakte hain that says ke agar aapka equity curve moving avergae curve ke below operate kar raha ho, then you stop trading.
Aur uske baad you restart the trading strategy only when the equity curve starts operating above the moving average.
Iske liye aap Technology me advancement ka bhi fayda utha sakte hain. Automation software historical data use karke aapke liye ye predict aur test kar sakta hai ke aapki trading strategy work karegi ya nahi and also its timings. Moving averages ke alawa there are other indicators too. Aap ye dekh sakte hain ke last 6/9/12 months ke returns zero se zyada hon, ya phir something on the lines on the 20-day moving average being above the 50-day moving average.
To sum it all up, main end me ye bolungi ke aap equity curve ko apni trading strategy evaluate karne ke liye use kar sakte hain. Let the equity curve be your guiding light!