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Covid-19 highlighting potential problems of the VaR system?

Ok but there are some cases where the risk manager boosts profit.
You can’t justify every day of performance to your investors, on the big picture it works.

Honestly, fixed VaR at 20%, I don’t think it would solve the problem.
I like the variable VaR, but having it between 5 and 20% would be the best, in my opinion.

You wouldn’t say this if you had spent hundreds of hours working on the system and on the risk management software I developed for the system :slight_smile:
I spent time to make sure that the system works on different market conditions, why should I adjust it when the market is more volatile if I already tested the system in similar conditions?

I don’t blame Darwinex. I accepted their rules from the moment I published my Darwin. I’m here not to point the finger, but with the hope that this can contribute to improve the service in the future.

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Not since they introduced the variable VaR.
I was trading so well with a stable ratio at 1.62.
1% of profit meant 1.62% of profit for investors.
1% of loss meant 1.62% of loss for investors.

If my VaR went up, investors’ VaR would have gone up too, in order to keep the same ratio.

Everything was so beautifully proportional. Risk for investors was higher than the underlying, but the two curves were similar. No risk manager intervention, no space for luck.

This is over with the abnormal volatility that came to the market. As I said, I don’t think I’m the only one affected by this.

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It’s fairly easy to do!


I appreciate it, but I think we were talking about two different things :slight_smile:

This is useful for someone who has a system that was not ready for a strong volatility like this and is looking for a way to lower the risk of the EA.
I was ready for this volatility, I have no intention of lowering the risk.

I have a course sharing my system and someone asked me time ago if I was planning to lower the risk (or suggesting students to do it) with the strong volatility in the very first days of this weird period.
This was my answer from the very beginning:


Also, I have no reason or personal gain to complain now that my Darwin is at a maximum. Lowering the risk could also be good to keep this good profit and attract more investors.
Still, I prefer to have a stable ratio and a stable behavior of the Darwin and I hope that this period served as a lesson and we will see something about the VaR in the future.
If not, no hard feelings, I will still be on Darwinex and accept the rules :slight_smile:

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Probably I’d be better than current.

Rules are not made based on how many hours you spent, or if you are manual or automatic trader. Rules are made for other purposes. You or me can’t take only the good side of rules.


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Of course, welcome to the market… :mask:

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That’s great!
You are the only who was ready, and the only who is complaining…lol (don’t take me serious on this one)

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Eheh I don’t think I’m the only one who tested a system in similar trading conditions and I don’t think I am complaining about it.
Before we end up another topic in the same way as all the others, I prefer to quit. I have written what I had to write.

Good luck everyone :slight_smile:


No, we won’t end up that way while we treat each other with respect.
BTW…congratulations for your excellent results, probably the high volatility helped you out after all…on top of your good trading practices…

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Ah yes apologies it was a little off topic, I just meant to reply to a specific part of a specific post.

I can understand what the risk manager is doing to you and how a longer calc period would help you and some other traders with fluctuating trade frequencies (but only if the calc period was large enough to absorb the fluctuation… what if it’s an extended 300 day high volatility period?)

In other situations where a trader (because of volatility or otherwise) has the same frequency but has increased risk by SL size or by lot size then the longer calc period would be detrimental because the ratio itself would be “wrong” for longer until VAR stabilized.

I’m kind of thinking of this issue as a trade frequency fluctuation in a VAR-per-month-world problem. Seems like not an easy way to alleviate that (via extending VAR period calc) while keeping everyone else happy. The technically correct way to stabilize VAR per month would be to decrease lot-sizes during times of increased trading. I understand this seems not fair and eating in to your profits… because for sure it is! If we weren’t trading for the Darwin we would be focused on risk per trade instead of VAR per month and we’d just keep risk the same and expect to make twice as much money that month.

However, I would not say “may as well stop trading…” if your underlying and Darwin are trading at ~4x the normal frequency and ~1/4 the normal lot size for a month then you’re expected return should be ~the same per month and expected potential DD should be ~1/4 the size for the same period, why would you want to give that month up?

BTW it is possible to develop an algorithm which could automatically make your lot-size smaller when frequency is increasing. Let me know, I can help.

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I think we are just not on the same page on this one :slight_smile:

Let’s wait and see how many millions will be burnt by the combination of this situation and the current VaR system.

HFD already burning thousands of dollars.

A difference of 4.91% between the Darwin and the underlying.
On 5.3 million AuM, already $260K burnt.

Next one is LVS, going from 5% to over 10% VaR, in a period in which he had a huge drawdown.

IRY started yesterday with half risk, to avoid to be in the same situation as HFD, LVS and many others that I haven’t even bothered checking.
Missed profit for investors after one day: $673.

Money that no one is getting. Not traders, not investors, not Darwinex.

If this is not something Darwinex should think about and if you think that this is only a personal complaint and the solution is to reduce the lot size… then what can I say? I’m the only fool here :slight_smile:


I don’t get it. Traders using 5% VAR were also doubling investors profits before high volatility (in comparison with underlying). High or low VAR can be of help or the opposite, it depends if you win or loss.

But VAR is a trader choice. I don’t really understand your point.

The only choice would be removing the RS, so every trader trade same on underlying and darwin.

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OK lets see. Darwin spikes up high in D-Leverage and in a short time the ratio changed. The volatility is maybe dying down now and this trader is stuck trading at “half strength.” I get that. This has happened on some other Darwins too. I get that too. LVS in particular is unlucky because Darwin went in to DD first while risk was large and now has to get out of the hole at “1/2 strength.”

I think the only thing I disagree with is the proposed change of the VAR calc period.

Shortening the VAR calc period would’ve have put LVS at half strength even sooner maybe soon enough for the risk manager to do its job and to prevent some of that DD from happening in the first place. Shortening it would have also the added benefit of making the ratio go back to normal faster as the volatility/risk dies down… But then ratio jumps around too much to fast.

Lengthening the VAR calc period has the reverse effect. It reacts to risk spikes slower keeping ratios from jumping around. Takes a longer time to start doing it’s job which leaves investors more vulnerable to sudden risk changes in the underlying Darwin which investors are supposed to be protected by.

I didn’t say don’t look at it. I’m just saying there’s a delicate balancing act and changing the var period has pro’s and cons that need to be looked at for every situation, not just the recent volatility data otherwise maybe we are just curve fitting the VAR period to the recent data.

One cannot argue that these traders taking less risk thereby keeping the VAR stable would not alleviate this issue.

I think most traders will rather have the control a super long VAR calc period gives them or better yet, no risk manager at all giving 1:1. I know that’s what I would prefer to trade with! But I think dealing with VAR and a fluctuating ratio might just be a necessary evil.


This is not how variable VaR works. You should read my starting post, with the table with investors’ VaR, personal VaR and ratio :slight_smile:

Agree. Investors are more vulnerable if they invest in a gambler who is suddenly increasing the risk, but they are more protected if they invested in someone who has an edge against the market.

You might have a strategy and risk management that adapts the lot size to volatility of the market, but not all the strategies are the same.

SW var

This is a second MT4 account on Darwinex that I have.
My VaR there is stable and low, because my Swing Trading strategy reacts to market volatility by lowering the lot size, but you cannot force other strategies to do the same, if they have been built to be profitable without doing it.

Darwinex is growing, I consider you a good trader. I see a few other good traders. Some others with a short track record but good potential.

Does Darwinex want to cut good traders’ legs because they have to protect investors from bad traders that in any case are staying less than a year here on Darwinex? Because this period proved that the current VaR is doing exactly this.


That’s correct and it is the trader responsibility to handle it. I can not blame Darwinex or its system for that. I don’t like the limit of the RS, but said that I think it is fair, sometimes helps other times make it worse. It is impossible to make it for everybody’s taste.

How and who decide who has edge in the market? Nobody can decide that at least you set rules.
I.E: rule that every trader with 3+ years in Darwinex and positive performance every single year has an edge. Ok, so Darwinex decide with a rule who has edge and can handle the VAR his way, is it something like that what you like? Putting you as en example, your performance is great, but it is only a few months account yet, so you couldn’t quality for a trader with edge, correct?
Otherwise, what kind of proposal would you make?

Nope, I tell you, you are anchored to the old fixed VaR system.
The variable one is a game changer in Darwinex and it is much better than the previous one. It doesn’t sometimes help and sometimes creates harm. It helps to keep luck out of the equation and it does a beautiful job. In my opinion, this period proved that it can be improved, this is it.

No one can ever be sure to have an edge against the market. Even if they do, no one can be sure that that edge is going to last forever.
This is not a reason to cut the legs to someone who is doing good, that knows what is doing and that is making money for investors.
I don’t have the arrogance to pretend that I have proved anything here and I honestly don’t think I have to prove anything to anyone. I am just a trader who shares his strategy. Investors can decide to follow my Darwin or not. I would be happy to see people trusting me and my activity, but I will continue to do my job regardless.
As I have shown with some numbers above, the current VaR is cutting legs to someone who’s been here for longer and is doing good, talking about HFD (and many others).
The current VaR costed $260K to HFD investors. Is it fair to let them pay because Darwinex has to save $260K from somewhere else, from people who invested in the wrong Darwin?
In my opinion, this can be considered fair or not fair, but certainly it doesn’t seem meritocratic. Neither for good traders, nor for good investors.

I also would like to have an opinion from someone from Darwinex about it.
Just asking without any bad intention or attacking anyone. A pacific question.

If not increasing the trading days in the calculation, would it be a big deal to increase the range of the VaR? Instead of 5-10, would it cause a huge damage to make it 5-20%?

If the trader is suddenly increasing the risk by an abnormal parameter, if I understand well, there is already D-Leverage calculation triggering the Risk Manager, adjusting the trade for investors.
So the problem is if the trader gradually increases the risk by a small amount, or if there is an increment of volatility, like the one happening now.
In that case, would it be too bad if the VaR ratio is constant for a little longer, before deciding to change Darwin’s behavior?

Just asking. If I’m wrong or we have totally different opinions, then friends like before, no hard feelings.

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Maybe I should wait longer to see how this change works, but what I am talking about is the low or high VAR. A low VAR can help or harm depending if you win of lose and it is same now than before, correct?

Ok, I don’t have any bad intentions behind my posts either, but have you an idea how to decide who has an edge on the market? Because one thing I have clear, rules have to be same for everybody, otherwise the fix would be worse than the problem.

With the variable VaR, what matters is the ratio between the personal VaR and investors’ VaR.

Old Fixed VaR

With the old VaR at 10%, every day we had a different risk for investors. What you say above is correct for the old VaR. If I have 2% VaR, investors are risking 5 times more, because they have a fixed VaR at 10%. If I have a VaR at 5%, investors have double the risk.
VaR changes every day. One day is 5% and investors have twice the risk, one day can be 5.50% and investors have 1.82 times the risk.
This matches with what you say above. Sometimes the VaR can help, sometimes it can cause damage.

New variable VaR

The new variable VaR is designed to give flexibility to investors VaR, so they can try to have the same ratio with the trader’s VaR. The variable VaR can go from 5 to 10%.
If I have a personal VaR of 4% and investors have a VaR at 6%, it means that they are risking 1.5 more than what I risk with my personal account.
Now, when my personal VaR changes, investors’ VaR changes in order to let them risk always that 1.5 more than my personal account.
If my VaR goes from 4% to 5%, investors’ VaR goes from 6% to 7.5%, so they will keep the same ratio with my personal account and they will still risk 1.5 times more. Nothing is changed in the risk for investors.
My VaR went up, investors’ VaR went up, but the risk is stable.
This is a game changer because it means that we don’t have different risks for investors every single day.

My case study at the beginning of this thread, shows that I start with a personal VaR of 3.19%. Investors have a VaR at 5.14%, the ratio is 1.62.
You can see that investors’ VaR is changing every day to adapt to the changes of my personal VaR, so we can keep a stable ratio at 1.62 and a stable risk for investors.

The problem that is rising now is that investors VaR is capped at 10%. When my VaR goes above 6.17%, investors’ VaR will not be able anymore to re-adapt to keep the same ratio of 1.62. Ratio will go down and so the risk for investors. Now, once the 10% cap is met, ratio is changing every single day and so the risk for investors. We are back to the lucky conditions that we had when we had a fixed VaR.

Rules can be the same for everybody. I’m not asking to consider these changes for my Darwin and not for the others. I strongly believe that these changes can benefit many other good Darwins and good traders here.