Trading Your Own Equity Curve: The Meta-Strategy Layer

The Equity Curve as a Signal

S34 treats the V7 equity curve as its own time series and applies a simple rule: when equity is above its 20-trade moving average, trade at full size. When below, reduce to 75% size. The logic is that an equity curve below its moving average indicates the strategy may be in an unfavorable regime, and reducing size limits damage during these periods.

This is a meta-strategy. It does not look at market data. It looks at the strategy's own performance as a signal for future performance. The underlying assumption is that strategy performance has autocorrelation, which is true for regime-sensitive systems like V7.

Impact on Returns and Drawdowns

In the backtest, equity curve trading reduced total R by approximately 3% (about -16R) because some of the "below average" periods subsequently recovered strongly and the 75% sizing missed part of the recovery. However, it reduced max drawdown by 0.15% and reduced the average depth of drawdown periods.

The trade-off is classic: give up a little expected return for smoother performance and lower tail risk. For an FTMO-constrained system, that trade-off is always worth taking because the penalty for large drawdowns (account breach) is much larger than the reward for large returns.

When Meta-Strategies Help

Equity curve trading works best when the strategy has genuine regime dependency. If wins and losses are independently distributed, trading the equity curve is just adding noise. For V7, with its regime-sensitive L1 models and cluster-specific thresholds, performance clustering is real. Winning and losing periods are not random. S34 exploits this structure modestly. It is not a game-changer, but it is additive in the direction that matters: risk reduction. Combined with S06 (anti-Martingale) and S40 (DD zones), it creates three layers of adaptive sizing that together produce the 0.08% breach probability.