Ah too bad, I had written a very long essay on VaR that I erased by mistake.
I do believe that the largest specificity of Darwinex is the fixed level of risk and the VaR set at a threshold that can be considered as high for investment standards (about on par to cryptocurrencies. On a given month, you’ll see that you can about lose the same regarding extents).
In theory, VaR should not have an effect on the offering, but in practice it has a perverse one at normalyzing behaviors.
Since the markets cannot be compressed, some compress their own trading instead. In short, it pushes for shorter term trades as well as traders to stay out of the market. Otherwise, accounts would either reach to the moon or crash.
A high VaR cannot let you perform clean swing trades because the market has to breeze between point A and B and about always there won’t be no escape to this situation. If you do practice on larger timeframe, which can arguably be very much showing another competency and degree of talent, your EC would look ugly compared to your peers.
So most, to a large extent as a consequence, actually underperform the markets very much and focus on maintaining their drawdown low as a form of compensation, which is another way to entertain illusion keeping you away from robustness. Mark Douglas would tell you they are avoiding to capture a more natural flow of what the markets have to offer at an accelerated frequency.
You can either escape your duties or adapt yourself immensely to play the fool and feel like you have the competency of the bests.
During webinars, sometimes Warren Buffet is used as a demonstration case. It should be mentionned that Buffet claims that using leverage is a crime...
On Darwins, the underlying leverage is so high (some will say moderatly high, whatever) that it’s okay to trade once a week during news releases, sometimes twice a month by being selective, in order to make it look like you have done the job, where really, you rather accomodated yourself to the environnement. It makes oneself deserve the trader title more easily (to my taste)
Therefore, one could make a statement that 6 months of Darwinex time could indeed often be a very short period of time in reality.
It is so true that I sometimes meet pals being joyful that they’ll trade their Darwin once in a while and the rest of the time “go to the beach” !
Let’s remind that an average daily range of EUR/USD right now is 0.78%. At 10:1 leverage it makes up for 7.8% of performance. Why trade a lot to achieve 25% a year ? Sometimes I wonder. The intraday courses linked together (tick by tick if you prefer) are about 50 times higher than this measure.
The other strats that show high frequency trades and get mediocre results from them is just that, their sliced trading shooting everywhere with large stops (another form of compensation) is mediocre at best.
I consider that the equity curves derived from the context of the VaR at 10% are very much special to Darwinex in their nature.
A whole breed of trading possibilities has not arrived yet at Darwinex because there is a pursue of self-realization by the users from the choices made.
I see danger in getting investors accustomed to this environnement where they get told that a -2% market move against, translating into a -20% Drawdown, is something to be considered as a failure, enough to feel shameful about and don’t deserve AuMs. That tells a lot about the irrelevancy of what is expected from trading the markets a certain way. That’s why I am an advocacy of the VaR at 5%, while I would really set it at 2% on my own. This would send a strong signal to the traders “now you need to get out of bed and work your asses off to show you have a real wide edge, not just get your results from leverage mostly”
The problem at Darwinex is that we don’t get Darwins at 250% per annum with 45% drawdown (yet), that would look beautiful with lower parameters, yet be much more tangible that many with 60%/-15% atm. Because, there is something nuts about asking to maintain -15% on 10:1 leverage. Right now Darwinex is encouraging (outside their will, I am sure) the message : “practice a medical laboratory grade trading with magnifying glass, that’s about the only way to keep the Drawdown within control and especially the only way to keep ECs that look like straight lines”. At least, that is what is heard by many. This context is known by the most clever (and lazy) users and being taken advantage of.
The right way would be to achieve straighter lines by minimizing the risk. As a counter effect, traders would need to trade more to validate they do have the skills and remain attractive. Not sure what would happen exactly to traded volumes but I doubt it would be a disaster. Only this way, investors could welcome more diversified strategy types without running away. They would get another education away from fear (“when is this superb EC going to show weakness” - guess what, it’s bound to happen because of leverage alone ! no more from the strategy/trader being particularly bad). I hope that Darwinex will understand this stance and integrate it in their concept.
Have a good weekend