UNDERWATER EQUITY [DIGGERDOG]

UNDERWATER EQUITY [DIGGERDOG]

This TradingView Pine Script titled "UNDERWATER EQUITY [DIGGERDOG]" calculates and displays the underwater equity (drawdown) of an asset, showing how far the equity has fallen from its highest point, expressed as a percentage.

Explanation of the Script:

1. **Variables:**
- `highestEquity`: Tracks the highest value of the equity curve (initialized as `na`).
- `underwaterEquity`: Stores the current drawdown from the highest equity point, calculated as a percentage.

2. **Equity Curve:**
- The script uses the `close` price as a placeholder for the equity curve, simulating the changes in equity based on the asset's closing prices. In a real-world application, this could be substituted with an actual equity curve.

3. **Highest Equity Calculation:**
- The `highestEquity` is updated to track the maximum value of the equity. If no value exists (`na`), it initializes with the current equity.

4. **Underwater Equity Calculation:**
- The drawdown is calculated as the percentage difference between the current equity and the highest recorded equity.

5. **Plotting:**
- `plot0` plots the underwater equity percentage as a red line.
- `plot1` adds a gray zero line for reference.
- The script fills the area between the underwater equity line and the zero line with a light red color, visually representing the drawdown area.

Visuals:
- **Red Line:** Represents the underwater equity, showing the percentage drawdown.
- **Gray Line (Zero):** Marks the point of no drawdown (equity at its highest).

Usage:
This indicator is useful for visualizing drawdowns in equity, helping traders track performance declines from the peak. It can be applied to any asset with an equity curve, allowing for better risk and portfolio management.

If you need further customization or explanations, feel free to ask!