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ERQ – OakLadder

Congrat for your great work.

As investor in ERQ and CWT I have’nt made all due diligence reading this interview for instance.

Now that it is done, an assertion made me nervous :

Suppose a trader has 10000 USD in his trading account. If he makes 50% profits (15000 USD in the account) and then loses 33.3%, his account returns to the original point (10000 USD). If he first loses 50% (5000 USD in the account), he then needs to make 100% profits to get back to the original point. It is easier to lose money than to make profits in trading. If an account experiences a drawdown of 20%, it only needs to grow 25% to reach the previous high.

I think that it is easier to make profits than to lose money in trading, and here is the proof :

Let’s have some trades witch win or loose 10% (for simplification, rather than 10 trades of 1%).
Let’s apply a proportional MM (more EC more lots), and micro lots enough small to deal with exact proportional MM.

Then if we win two time, we have 100, then 110, then 121.
On the other hand if we lose two time, we have 100, then 90, then 81.

So when we win two time we win 21 and if we lose two time we lose 19.

This 2 units offert by gods of trading is the proof that it is easyer to make profits than to lose money. :sunglasses:

Happy new year.

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Win once and lose once - each time these 10 percent with the same size - makes 99% of 100% . That‘s not profit after two trades. Math is scary

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You are perfectly right, gods of trading gives the bonus only if you win two time.

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After 4 trades - 2 winners and 2 losers- with 10 % each the result is worse. The sequence of winning or losing does not change the final result.

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Yes. Multiplication is associative, wich is frightening during a full moon night.

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I think what @OakLadder simply meant (and clearly implies) is that due to the fact that capital is getting smaller every time you lose it is harder to recover. That’s it.

I could even interpret his sentence “It is easier to lose money than to make profits in trading” in a different way and say that for some traders it will be easier to win and for others it will be easier to lose depending on who the trader is.

Some traders can’t help but win even if they try to sabotage their system and others can’t help but lose even if they continually strive to improve their results. :grimacing:

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I am just curios about what you guys think about ERQ equity and VAR. I have heard many times these contradiction from the same people:
“I only invest on darwins with a good amount of equity” because they put their skin on the table and it means they believe in their trading.Then praising ERQ as a great asset to invest in".

ERQ has $7000 equity, what looks good. However its VAR is 0.12%, and he doesn’t trade too much per day anyway.
So, even he has $7000 he only risks cents of his equity on every trade (see the underlying https://www.darwinex.com/account/ERQ.4).

I am going to give my opinion the first:
ERQ is an smart guy, he risk nothing to get everything. He plays Darwinex rules and the non sense VAR to take advantage of the risk manager. Nobody can criticize him to play with the rules on his side. Darwinex should think about it, and rethink the VAR, because in Darwinex most traders trade for the darwin, and that is not real trading. The only way to see real traders is trading both accounts (underlying and darwin) with the original VAR, that is the underlying VAR, then is when equity counts!

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A minimum VaR is needed to protect both: traders and investors.

ERQ is traded with a leverage of 80 and is trapped by this. If he trades a microlot with a 7k account, 700k of investors‘ money are trading estimated 80 lots. If he trades more, investors also will trade more until the VaR comes out of this insane region, which would need more than 30 or 40 trading(!) days.

The markets like LMAX only accept about 3 lots on best price during liquid times, so they could play with him and there are not many situations left when he can trade. Not being able to trade normally is bad for him and his investors - with additional destructive factors like slippage and divergence.

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VAR doesn´t protect traders, because it doesn´t stop a trader to risk everything in one shot at any time. Trading at 0.12% is only risky for the investors.

Well, I don´t think he is trapped, I believe it is made it on purpose. ´

In this case, it would lower the risk of investors money, so it´´d be a safe move for them. The risk would be for his own equity, he would risk more on his own money.What I think is he doesn´t want neither doesn´t need to do it, because he is very comfortable and safe the way he is doing it.

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Yes, but he can’t make much money with it on fees anymore if there is no change

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Blockquote
Darwinex debería pensarlo y repensar el VAR, porque en Darwinex la mayoría de los comerciantes intercambian por el darwin, y eso no es un comercio real. La única forma de ver a los operadores reales es intercambiando ambas cuentas (subyacente y darwin) con el VAR original, que es el VAR subyacente, ¡entonces es cuando el capital cuenta!

Then crazy things like this would happen that affect the Inverson

Yes I agree with you.

In fact I was kidding, showing how it is easy to achieve a logical error when playing with numbers.

Unfortunatly if the psychologic effect and strategic one is true, one could think about a mathematic effect, what is false.

Winning 100% or loosing 50% is exactly the same thing : winning 35 time 2% is plus 100% and loosing 35 time 2% is minus 50%.

On the other hand, if contract size (tick value) is huge regarding the capital, then an anti martingale effect could appears. If the MM system compute 0.15 lots and you have to choose between 0.1 or 0.2 lots then the risk is huge to encounter problems on the way going form 0.1 lots to 0.2 lots. Winning trades are with 0.1 lots and loosing trades are with 0.2 lots. This porportional MM effect could be higher than strategy’s alpha.

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I thought so, but from time to time I can’t help but respond. :sweat_smile: It’s just my instinct popping up. Something like the fable about the frog :frog: and the scorpion :scorpion:

Regarding Martingale or Anti-Martingale, I rarely pronounce the word, I don’t even spend a second thinking about the concept, or even attempting to practice it. I understand many investors are concerned about it (and rightfully so) but in my case, as a trader I always go back to this comment from “The PlayBook” by Mike Bellafiore:

A hardworking new trader asked, “Bella, would that have been a place to double down?”
I responded like a Judge while pounding his gavel, “Please never ask me that question again.
Doubling down does not work for the intraday trader. I have tried it. 85% of the time you will profit when you double down. But the 15% of the time you are wrong, you will get smoked. The losses during these trades will far outweigh the gains from the 85%.
The math does not work.
And I even tried to master this technique during a range-bound market where this should work best. Just forget about it. It is a waste of your mental energy to master doubling down.”

Hey @OakLadder,

Congratulations for your great work and success! I just wanted to ask you about the recent change on the Darwin VaR from fixed at 10% to variable at 5%-10%.

How does this change impact your plans of wanting to increase the VaR of the underlying strategy as a mean to increase the AuM capacity?

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Welcome - just wanted to say that ERQ is now open (dont know for how long). Judging from your posts I think you might want to know that :slight_smile:

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Thanks! That is very kind of you (and observant). I got there too late, though… I am still trapped in my mind and in research due diligence. I don’t think I am (yet) in the paralysis-because-of-analysis zone, but I’ll get there if I don’t make a move soon. Anyway, Oakladder says is working on increasing the AuM capacity so I am sure that will happen.

To your assumption of me being interested in ERQ: Ofc, I am, but: As someone who doens’t know how to read trading journals and has zero experience in algo trading, often I can only rely on my reading and cognitive skills to judge a Darwin (+ the wisdom and kindness of this community): And I have observed that the idea of Darwins with very low VaR’s being (potentially) dangerous seems or has been prevalent in this community, which would post questions on investing in ERQ.

Here is where I am left with doubts, being a noob here, looking at the curve equity and the numbers ERQ is probably the Darwin that looks best of all and having read everything I could from @OakLadder I have no reason to not admire his skill and honesty. So how do I reconciliate these two facts? 1) Micro VaR potentially being dangerous and 2) ERQ looking awesome by all the criterias I can judge it with.

@IlIlIlIlI, I’d like your inputs here. (sorry, my friend, as far as I’ve read you’re the only person in the community with doubts around ERQ, gotta pull you in here hahaha)

Would you mind, being specific and sharing the reasons (I believe) lead you to think ERQ is not a good investment long term because of its likelyhood of crashing down anytime?

This is how far I can get myself into why low VaR could be dangerous, let me know if this is your concern or goes deeper than that: If the underlying strategy is trading with a 0.2% VaR and a series of Stop Losses happen, the effect of them will be magnified by 50 (0.1/0.002) in the Darwin. At the same time, having read for some time here I know/sense it’s not as simple as that, but I don’t understand the details of it all. I could also argue, the positive trades are also being magnified at x50, if the x50 is constant there shouldn’t be a problem. [You see? I don’t fully understand this… Help!]

Ultimately I don’t have a reason to not believe Oakladder when he says

Which btw, he doesn’t seem to want to increase the VaR because it’s risky for the investor, but because it’s preventing him to increase the AuM capacity.

You seem to think he’s not doing the best choices to achieve the best possible risk-profitability relationship for the investor, and I am very curious about that.

Ps- Sorry If I miss-interpreted you.

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First of all: no doubt that @OakLadder and @AccuGlobal are very successful Darwin managers, please don’t forget that while reading the folowing lines.

As I joined a two hours communication course this week, I will answer with some questions :joy:

Would you follow a trader with 1 % profit per YEAR with your real money?
On the trading account of ERQ you find less than 9% profit in 6 years and on the one of ZVQ about 20% in 10 years. That’s about 1 % per year. Really attractive for an investment with the high risks of Forex or CFD trading?
That’s why I don’t call them traders, but successful Darwin managers.

Isn’t it great to make 1,000 % profit with trading for 1% profit per year.? 1.000% on the Darwin ZVQ on its all time high with 1 % yearly on the trading account, as ZVQ can show these numbers.

Would you buy or sell any pair with 60 or more full lots by pressing a button on your MT4 terminal? Can you imagine how the market will react and take it when usually there are 3 lots offered like on LMAX on the bid and ask side? They might read it as a fat finger trade and you might see new dimensions of slippage. These 60 lots are the result of the low VaR. So the main problem with ERQ is just that the risk manager has to place orders of that size to the market nearly at once because of the micro VaR. I think ERQ will need some more months to come to a reasonable level on VaR. And as the trader of it you will see the same situation when you close the trade, so ERQ should never come into an uncomfortable situation that a trade must be closed immediately.

Darwinex could reduce the pain if they would set a lower bound of 1 or 2 % to the VaR so the current possibly nearly unlimited leverage is capped.

The result of that extremely low VaR and its risk can be seen end of July 2019 on ZVQ, it is not recovered until now.

That’s not so easy, if he doubles his trade size the investor’s trade size will also be doubled until it is capped by the risk manager. You see these interventions of the risk manager under the Ra attribute which is currently very poor on ERQ:

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I really appreciate your time in sharing your thoughts! :slight_smile:. Helps me a lot in keep navigating all of this complexity.

I am sorry but I didn’t get at all, your message here.

Yes if the tools he is using to share his trading skill with investors (i.e. Darwinex) forces/allows him to do so. The amount of time and effort behind ERQ seems very significant, I don’t think the trader behind would be spending that much energy for a +1% yearly profit of his own money. Assuming genuine honesty from trader, I don’t give a lot of importance on his monetary skin in the game, just because wether he is risking 2usd or 3464usd per year (10% underlying monthly VaR with a 10k account), both are very very small amounts of money relative to what’s at stake here for the trader/darwin manager.

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You trade the same huge size when you open a position as if you close it. Shouldn’t happen when unexpected news are used to move the market against the open position immediately.