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My analysis of the issue of the Monthly VAR

In reading this post OPK – Mallku

I feel some frustration because I feel clearly identified the problem, mentioning it, but have failed to make myself heard and preach in the desert.

So I shall give a layer on a new Topic. For it is not a secondary issue, in my opinion, it is even THE current central problem.

So for me, the problem was the update in August of the algorithm that calculates the Monthly VaR of the strategy.

To be more specific, the suppression of the time weighting provided by the inclusion of the “D-PERIOD DURATION”.

To me, it is clear from this change that we are witnessing a drop in Monthly Var.

One aggravating factor, that the capital of traders was made public, prompting a capital increase that for reasons of credibility, and it reinforced the Monthly VaR drop.

The fact that on Darwins as OPK and ERQ Darwinex multiple volatility by 20, respectively 100 is still incredible and should interpellate !

Instead of questioning the foundations, reduce the reference VaR, etc, it might be better to replace the calculation of the Monthy VaR to the old version.

I know it all I’ve said. But in October I lost enough money to allow me to repeat it again!

I read and I’m excited for all the announcements.

But I am still convinced that a rapid return to the old calculation of Monthy VaR could reduce the severity of the problem.


You insist on old calculation.:neutral_face:
The problem in this case is not the calculation of the VAR or the multiply factor of the risk manager.
The problem was that OPK and ERQ started to trade with 0,5% var.
Risk manager needs to be updated because it worsen the quality of some strategies, like my LSC or GPF.

In my view these incredible Var are precisely the result of the vicious circle introduced with the change in the calculation of Monthly VaR.

The trader does not get up one morning saying, “hey, I’ve decided trading with a 0.2% VaR”

The trader has weeks of time to realize that his var is changing and has all the power to regulate it changing size or changing the amount of money in trading account.

I agree, but is caught in a vicious circle:

“Darwinex increases the risk of my Darwin, I reduce the risk of the strategy”

A trader’s job is not managing the var but TRADING;

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And that is totally wrong.
As a trader you have to keep a stable risk.
VAR of the darwin is 20% point…
You cannot change it, if there are no conditions to trade you don’t have to trade, if you trade you have to do it with the usual risk.

Managing the risk is not the same that managing the darwinex var.

NOBODY can manage the var.

I dont’ have to change the risk of your darwin, you can mange the risk of your strategy and you have to keep it stable.
Going from 5% to 0,5% is as wrong as going from 5% to 50%.
If you want to work here these things need to be clear.

I agree completely.

My goal is to establish diagnosis of the slaughter that took place in recent days.

And clearly, this is largely due to a replication which boost the risk between strategy and Darwin.

And say Darwinex did everything right, it’s only the fault of the traders, I do not agree.

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Darwinex should stop your darwin if you work with less than 2% var…
And the trader should be warned to increase.
A darwin’s risk has to be stable by definition.

I agree but this is the job of darwinex not of trader.

A trader can fix his SL/TP that’s all.

A trader can decide sizes, that determines the var of underlying strategy…

I agree, but I would put the limit at 5%

But above all is to Darwinex algorithm to manage Monty VaR within an acceptable range.

Yes but the problem is that when a darwin earns 25% in one month nobody complains…
Whe the darwin lose 25% it is a shame… :smiley:

I’m afraid is not as simple.

The var do not depend only from sizes…

That’s why for me is not a good mesure.

It doesn’t protect anyone (we have the proof) and create much confusion.

Nobody know much about the var calculation so managing something you don’t know is a little difficult.


What traders have to do is studying their risk stability diagram and fine tune the volatility of their strategy.
This will raise risk management score and will make the darwin work in a smooth way.
You can trade everywhere, if you want to be a fund manager you have to do your homeworks.

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I agree 1000%

When the anomaly boosts the performence, everyone is happy.

And when that hand in the other direction, everyone screams scandal.

As the analysis of plane crash allows increased air safety, it is appropriate to analyze the current problems to correct them.

And I persite to say that the current version of the calculation of the Monthly VaR is too aggressive with respect to the time frame of its calculation.

And I still say that the problem does not exist, or at least was less exacerbate before changing the calculation of the Monthly VaR.

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