CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 64 % of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

IDT - BenHardy

Hi wilko,

Thanks for your message.
Darwinex risk engine “normalizes” the risk of any DARWIN, that’s true. If the underlying strategy is very consistent and reasonable regarding the type of trading, sad engine’s “distortion” of the original system will only be very small. So if the respective trader varies the lot sizes e.g. depending on probabilities of specific trades to become profitable, this shouldn’t be a problem. The same applies to a portfolio of startegies e.g. including day- and swing trading. The intervention of the risk engine however will become stronger if the trader in rare cases utilizes unusal big lot sizes. Even if this may be profitable in the long run, the engine will consider this as exessive risk, no matter how big said position’s sizes are in absolut terms.
Darwinex’ risk engine however has issues if the underlying strategy abruptly changes or the trader makes a big withdrawal / deposit without adjusting the lot sizes he normally uses. Practically speaking the automated risk manager system improves the reward to risk of most DARWINs, some of them however are losing edge (more or less).
The more consistent the trading is, the better the risk engine can work…

Hope this helps!

Best,
Ben

1 Like

Hi @BenHardy
What about IDT current VAR : 0.5%
Is this your target or it is due to some kind of transition?

Hi CavaliereVerde,

After many daytrading strategies got into trouble in 2018 I decided to stop my personal respective trading and developed a system that considers higher timeframes. So after my past daytrading followed by a longer pause, Darwinex’ risk engine is facing now a totally different strategy on IDT. Furthermore said new strategy averagly is much more volatile than in the last weeks (since “live inception” after the pause). This leads to different types of distortion regarding the risk engine’s impact on IDT. It’s hard to predict when the VaR measured by Darwinex will reach a halfway consistent and reasonable level. I’d say the VaR of the underlying strategy should be about 1.5 % in the long run if I don’t change the risk profile anymore.

Best,
Ben

2 Likes

IMPORTANT UPDATE on 25th of April 2019:

Due to technical problems I unfortunately must stop IDT (again) and solve the issue. Until further notice I recommend to withdraw your investment from this DARWIN. Trading will resume as soon as the respective EA has been fixed (1 - 3 months). Please keep IDT on your watchlist!

P.S. Please note that the original strategy made a small profit since inception in mid of February 2019:

1 Like

IMPORTANT UPDATE on 1st of November 2019:

IDT will start trading again on 4th of November (2019). Please read the modified presentation above for further details (first post in this thread).

Best,
Ben

3 Likes

Please be aware of the fact that after the long trading pause - now with a new portfolio of strategies - it’s hard to predict how Darwinex’ risk engine might react within the next weeks. So be prepared for some unexpected “volatility moves”.

Thanks for your understanding,
Ben

You’re trading with a VaR of 0.37 which is a leverage of about 27. IMO that’s extreme.
During inactivity there is no change on parameters or attributes as far as I watched it, because your Darwin is only calculated when you’re trading.
If you trade now different assets or sizes than before, it will change slowly.

1 Like

Basically you are right: Darwinex’ risk engine will ALWAYS adapt the VaR risk multiplier slowly whenever a DARWIN’s native risk changes. However at the same time that’s an issue in some cases: Let’s assume you run a strategy on a 10k account with averagely 0.15 lot per position but most positions are 0.1 lot, some “spike” up to 0.5 lot. Then you suddenly natively increase the risk by factor 5, meaning the first “new higher risk trade” is conducted with 0.5 lot instead of (old risk) 0.1 lot. In this scenario Darwinex’ risk engine will consider said new trade as a regular one, even if the SL (if used at all) is not smaller than the previous ones. So if the first trade gets stopped out the DARWIN investors will suffer a loss that is 5x higher on the basis of VaR95(monthly) = 10 %. So if previously a typical SL event resulted in e.g. 1 % loss for the investors it will now be 5 %. Darwinex risk engine will NOT reduce the lot sizes because
a) it doesn’t know that the “new” 0.5 lot trade is an “old” 0.1 lot trade
b) 0.5 lot isn’t abnormal compared with the “old” risk setting
c) the calculation of VaR95(monthly) = 10 % is always lagging and needs up to 3 months to correctly consider a new strategy and/or risk setting.
Surely this is a very extreme scenario and doesn’t apply to IDT all that much. But I hope my example makes the issue more clear.

2 Likes

I understand your example.
But SL is not regarded by the risk manager - I assume, because you can change it anytime.

The risk manager only regards the open DD (or loss) and intervenes to smooth it for investors by reducing their lotsize.
As you wrote, the 0.5 lot trades were also made before, then the risk manager will exactly do the same as it would have done before with the 0.5 lot trades.

Yep, you summarized the issue I tried to explain in detail. So Darwinex’ risk engine in some cases can’t recognize that the underlying strategy suddenly increased (or decreased) the risk a lot. It will take up to 3 months till the risk engine can “translate” the new risk correctly for the investors. But within the first weeks after said event the following scenario is possible:

Strategy’s VaR95(monthly): 1 % -> 5 %
DARWIN’s VaR95(monthly): 10 % -> 50 %

Yes, this sounds terrible and really describes a “worst worst case scenario” with an unexperienced or reckless DARWIN owner. But “wrong VaR’s” - more or less - will always occur whenever a DARWIN’s underlying strategy significantly changes and/or the native risk setting gets modfied a lot within a short time span or instantly…

2 Likes