Creating Equity Curves in Python to Visualise Trading Strategy Performance

Sometimes a picture speaks a thousand words when it comes to evaluating trading strategy performance!

The end result of developing and backtesting any trading strategy is typically a set of statistics that indicate how well the strategy has performed in the past. However, I have found that whilst helpful, seeing raw statistics doesn’t give you the full picture.

A simple technique I have used to understand the performance of a strategy is to create simple visualisations. For example, by plotting the equity curve as a function of time and shading the regions where the strategy produces winning and losing trades.

Here is an example for a simple Moving Average Convergence Divergence strategy applied to the BTC-USD trading pair:

In my opinion, charts such as the above make it more straightforward to see the overall picture of strategy performance. For example, I can quickly see that:

And that was a super quick analysis — a longer stare will surely reveal more!

In this article I will share how these charts can be made rather easily in Python using the plotly library. I will include the base code in this article which will create the above image; you can afterwards fine-tune that code to your liking.

Side note: The excellent feature of plotly is that it creates an interactive chart in your browser, so you can zoom in, turn on/off different chart elements and download screenshots!

For the purpose of demonstration, we are going to consider a simple strategy based on the MACD technical analysis indicator.

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