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Introducing Return / Risk (since inception) & Average D-Leverage / Position

@JesusDarwinex let me only clarify and confirm my understanding with one question about the value and chart of d-leverage per position shown. I think that it could help the understanding the concept of this chart for everybody.

We know that the d-leverage is calculated with the leverage (lots/equity) of the underlying strategy, corrected with the volatility and correlation between the pairs of the position.

This d-leverage (STRATEGY) with the time in market of this positions is used to the calculate the VAR of the underlying strategy.

After we can calculate the actual d-leverage of the darwin, correcting from the var of the strategy to the VAR10% (d-leverage DARWIN)

Let me one Example to clarify the question:

Suppose a value of 40 of the d-leverage of a strategy. This implies a VAR 80%.
Then to calculate the actual d-leverage of the darwin VAR10%, we have to calculate 40x10/80= 5 (d-leverage DARWIN)

In this example, I understand that the d-leverage shown in your new charts would be 5, isn’t it?

I would like to confirm because I think that it is the first time that the d-leverage of the darwin is shown, because in other places (chart Ra and the trading journal the d-leverage shown is the strategy’s d-leverage, in my example: 40)

By the way, I completely agree that the d-leverage that you have to shown in this new chart and value, is the d-leverage of the darwin, as you did, because if not, it wouldn’t be comparable between all the darwins.

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I like the Return / Risk feature.
Will the Return / Risk feature also be included in the filter criteria?

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@Kingfisher1978
You can already filter by Return and DD
BTW I cannot see any advantage in filtering by Return/Risk instead of filtering by Performance.

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You can also filter by the “Return / Drawdown ratio” in different periods which calculates the absolute ratio in %. A value of 2 means that a Darwin made double return (for example 30%) than drawdown (for example 15%). I use it with value 2 on the 2 years time range.

The Return / Risk figure compares against synthetical random strategies, and both filter criteria with a value of 2 could find excellent Darwins - if there are any :innocent:.

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Thank you guys for the feedback.

It is helpfull but maybe I don’t understand the “Return / Drawdown ratio”.

If I for instance try to find darwins with a return/drawdown (return darwin divided by the max drawdown of the darwin) no greater 3 no matter what the actual return of drawdown is. How kan I find them?

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I think you understood it right.

You have to select a time range (monthly to 2 years) as usual in the filter criteria of “Return / Drawdown ratio” where you enter the “3”. With the time range you define the start value of the figure until today (or the last calculation of it).

If you want the worse ones than 3 use the “To” Value to enter it, otherwise you enter the “3” as from value so that you will also get the better ones. That means that you would also get the Darwins with 10 % profit and 3 % DD.

You should also be aware that filters don’t bring correct results on the weekend because of maintenance procedures, the issue is not solved yet:

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Thanks @rogorfx!

In fact, it is a kind of Sharpe Ratio "à-la-Darwinex" since this metric shows the risk-adjusted return with a target risk set at 10% monthly VaR.

Please, check the correlation matrix of you invested Darwins (both live and demo) by clicking on the tab “portfolio risk” in the investor terminal. It seems that NTR and LVS are highly correlated. If you notice something wrong, please send us an email to info@darwinex.com with as much info as possible and we’ll review it with our dev team :wink:

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6 posts were split to a new topic: Different rules for performance fees

Hi @JJENSLOPFAM!

Let’s not forget about the duration of the position :wink:

Correct, the average D-leverage per position in the Darwin will be 5.

Let me know if you have further questions :wink:

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Even if you set 2 years you will find lucky darwins running from one quarter with a return of 40% and a DD of 5%.
This is the problem with classical rates, to be reliable they need 3y of trackrecord, this is the reason why Darwinex created Performance, Experience and DScore. :slight_smile:

https://www.darwinex.com/darwin/BBQ.4.13
What is better: Return and other Return-dependent rates, or DScore ? :wink:

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If you know that 2 years are not reliable enough, you should make a proposal to add 3 years to the filter time ranges.

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Is this going to be added to backtests too? It doesn’t look like it is at the moment.

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One thing at a time @TraderTom :wink:

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It seems to me that it misses an article explaining in a clear and detailed way the metric ‘Average D-Leverage per position’ on http://help.darwinex.com/

Curious for a graphic that is prominently featured on the Darwins main page.

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After some months I can say that a chart of DLeverage of the Darwin doesn’t add value to my analysis.
It tipically ranges from 2 to 6 and mostly depends on the volatility of the markets.

DLeverage of the strategy in trading journal much more usefull to dissect the behaviour of the trader.

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I would like to have details on the impact of AUM on this metric for example.

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Hi!

Thanks for pointing this out. We have not included it yet, but it is on the list of new Help Center Articles.

For now, we have only included articles about IAs and a bit more. So it may take time before we publish on this.

Regarding this, it is not so likely that we talk about this in an article, maybe on a future blog post.

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FYI, a number over 1 means that it has statistically beaten at least 68% of random strategies. A figure over 1.65 has statistically defeated a minimum of 95% of arbitrary strategies and a number over 2 has statistically beaten 99% or more random strategies.

@JesusDarwinex I am really loving this return/risk metric in analyzing darwins, but could please clarify what sort of distribution this value has? At first I thought it might be standard normal distribution (1.645 being 95th percentile, almost matching your 1.65) but 1 and 2 being 68th and 99th don’t match. If not, could you perhaps give values for percentiles 75, 90, 97.5, 99.9? Thanks

It seems that @JesusDarwinex has been absent since January? @miguelrDarwinex could you please answer my question above? Thx

Here we go ! :yum: but i understand your question.

Please look the Return/Risk daily, weekly, 3M…compared to Inception.

Also i understand your question: another estimated ratio ?