How to read the balance report! Interpreting EA operations from 2 types

Continuing from last time, we will look at the equity curve.

This time it is the overly optimized type and the psychologically painful type.

Overly Optimized (Curve-Fitting) Type

It is a very spiky graph.

If an EA is optimized to an extreme during creation, the equity will rise and fall like this, creating a spike-like graph with no clear direction.

Also, in the latter half it is hard to tell whether it is rising to the right or not.

Graphs like thisbecome easier to understand the equity trend by drawing a straight line at the start and end points. This time I drew the line with Paint, but usually I use a transparent ruler.

In the first halfabove the drawn linethe equityexistsis favorable, but in the latter half it appears flat.

Since the quantity is increasing, it seems to be a compounding type, but because there is no increase in the middle to the latter half, it confirms that the latter half equity is not growing.

EA that has been overly optimized will not generate profit when operated.

It is the result of pursuing profit over a fixed past period, and because the direction is not determined.

A highly volatile graph with spikes is suspicious; let's look at graphs from other periods.

Psychologically Painful Type

Compared to the initial equity graph, the number of trades is similar, but this one does not have the spiky feel.

The growth in the middle looks better, so it appears to be a compound-type, but since the lot size is not displayed, the position size seems fixed.

This is also a difficult graph to understand, so like before, I drew lines at the start and end points.

In the first half, equity gradually decreases, but in the latter half there is an increasing trend.

The horizontal axis of the equity chart is by order units, not the same as the time axis.

There are about three points where it suddenly spikes upward vertically. A line rising vertically indicates that a large amount was earned in a single trade. Perhaps the position was held for a long time.

If you look closely, there is a vertical rise, but there is no vertical drop.

This could bea trailing stop systembeing used.

Using a properly wide trailing stop reduces risk and increases profit, allowing a single trade to yield a large gain like this.

Reading Risk from the Graph

This EA is probably a simple interest trailing stop type. It ends up with a profit. The growth in the latter half of the equity graph is attractive.

However, if you operate it andthe graph performs the same way, what would happen?

Imagine the period of decline in the early half. Would you be able to endure daily decreases in equity?

Whether it grows in the latter half is not known at this point.

Before starting operation, visualize the progress by looking at the graph, andconsider how much the asset would decrease over a certain period and how much asset value would decrease,and analyze while also considering the psychological risk aspects.