How Open Trades Affect an Equity Curve in a Trading Backtest
An equity curve shows how a backtest’s reported account value changes over time. Depending on the platform and reporting method, the curve may reflect only closed trades or may also include unrealized gains and losses from open trades.
That difference can change the shape of the curve and how the backtest appears during periods when positions are still open.
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What Is an Open Trade?
An open trade is a position that has been entered but has not yet been closed.
While the trade remains open, its value can move up or down as the market changes. Those unrealized gains or losses may be reflected in an equity curve, depending on how the backtest platform calculates and displays account equity.
If a report uses closed trades only, the curve may not change until the position exits. If it includes open-position equity, the curve can move while the trade is still active.
Closed-Trade Equity vs. Open-Trade Equity
A backtest can display account performance in different ways depending on how the reporting platform handles open positions.
Closed-trade equity generally changes when a trade is completed. Gains or losses from positions that are still open may not appear in the curve until those positions are closed.
Open-trade equity, sometimes called mark-to-market equity, can include unrealized gains and losses while positions are still active. This means the equity curve may rise or fall before a trade is completed.
Neither view tells the whole story by itself. The important point is to understand which method the backtest report is using before interpreting the shape of the curve.
Why Open Trades Can Change the Shape of an Equity Curve
An equity curve that includes open-position equity can show temporary gains or losses that may disappear before a trade is closed.
For example, a trade might move sharply into profit while it is open, causing the equity curve to rise. If the market later reverses before the trade exits, some or all of that temporary gain may disappear.
The same can happen in the opposite direction. An open trade may show a temporary loss that later recovers before the position closes.
This is one reason two backtest reports can show different-looking equity curves even when they are based on the same completed trades.
Why This Matters When Comparing Backtests
Two backtests can report similar final results while showing different equity curves if they handle open trades differently.
A closed-trade curve may appear smoother because unrealized swings are not displayed while positions remain open. A curve that includes open-position equity may show more movement between trade entries and exits.
That does not automatically make one report more accurate than the other. It means the calculation method needs to be understood before comparing the curves or drawing conclusions from their shape.
What to Check in a Backtest Report
Before interpreting an equity curve, look for clues about how the platform calculates and displays account value.
Useful things to check include:
Whether open positions are included in reported equity.
Whether unrealized gains and losses are marked to market.
Whether the chart represents account balance, account equity, or another calculation.
Whether the reporting method changes when trades are opened or closed.
If the report does not make this clear, comparing its equity curve with another platform’s curve can be misleading.
How Open Trades Can Affect Drawdown
If a backtest measures drawdown from account equity, unrealized losses on open trades may deepen the reported drawdown before those positions are closed.
If drawdown is based primarily on closed-trade balance, some temporary open-position losses may not appear in the same way until the trade exits.
Because platforms can calculate and display these figures differently, two reports based on similar trades may show different maximum drawdown figures.
That is why it can be useful to review maximum drawdown alongside the equity curve and understand how each figure was calculated.
Open Trades vs. Closed Trades
An open trade is still active, so its final result is not yet known. A closed trade has already exited, so its gain or loss has been realized in the backtest report.
That distinction matters because some statistics are based only on completed trades, while others may also reflect changes in account equity while positions remain open.
For example, trade count usually refers to completed trades, while an equity curve may change before a trade closes if the platform includes unrealized gains and losses.
Understanding which figures include open positions can make the rest of the backtest report easier to interpret.
Putting Open-Trade Equity in Context
Open-trade equity is only one part of a backtest report. It can help explain why an equity curve moves between entries and exits, but it should be considered alongside the rest of the reported results.
Metrics such as net profit, maximum drawdown, profit factor, trade count, win rate, and average profit per trade describe different parts of the backtest.
Looking at them together can provide a clearer picture than relying on the shape of the equity curve alone.
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Backtest Triage LITE is an educational Excel workbook for traders who already have backtest results and want a clearer way to organize and review reported statistics such as net profit, maximum drawdown, profit factor, trade count, win rate, and average profit per trade.
Backtest Triage LITE is an educational backtest review tool only. It is not financial or investment advice. Past, simulated, or hypothetical results do not guarantee future performance.
