Management of the position
Aversion to loss: Framed in white, the last phase of the lowering of the risk assumed in the operations appears.
Risk stability: The lowering of risk means that VaR does not stop decreasing. During the green frame phase, VaR stabilizes, although this is where the 'last drawdown' takes place.
Return / Risk: The decline in VaR leads to a significant divergence between Darwin and Strategy results. In fact, the 'last drawdown' is accused in Darwin, while in the Strategy it is hardly noticeable.
To avoid this dangerous lag, it is necessary to make the VaR tend to approach 10% and then stabilize.
Consistency of returns: The objective remains to maintain the same consistency in the results.
Risk Adjustments: The objective remains to operate within very prudent margins, avoiding the risk manager having to act out of excess leverage.
Until now, an attempt has been made to raise VaR by increasing leverage, by decreasing the capital in the account and maintaining the same size of operations. The measure has not been sufficient.
It is now necessary to slightly increase the size and frequency of trades again, but try to do so without putting the investor at greater risk.
Statistical results indicate that the corrective action should focus on three actions: Avoid adding new trades to the position, so as not to put at risk what has already been won. Trailing stop to breakeven, to secure the positions. Make positive partial exits, to collect profits as soon as possible, and negative partial exits, to avoid strong drawdowns.
The implementation of the new measure will take place in November.