Hi all! My name is Jernej and I’m a manager of NTO. It’s been 7 months since I joined Darwinex and I am ready to show you the underlying strategy behind my darwin.
First a few words about myself. I am employed as a software engineer and only got into trading in late 2017. So I am relatively fresh in this field. First few months I was trading on a demo account, then in 2018 I began using real money. I started off with a small account of €1000, just to get the hang of it. First year, my main focus was survival. I wanted to learn as much as I could by not taking a too big of a hit to my account. In my second year I started using different tactics and approaches. I was very profitable, but that was more due to luck than skill I would say.
NTO employs a discretionary type of trading. I would describe my trading style as relatively infrequent (0.43 trades/day), risk averse and conservative. NTO’s main goal is capital preservation. Darwin works best with breakouts (wedge, channel, H&S…). The worst performance is expected in consolidation period, like in current times (Covid-19). When this happens, after a few failed trades, I decrease the frequency and start lowering the risk from standard 1% of capital per trade to 0.5% or even 0.1% (in case of extended losing streak). I rarely enter a trade with a full position. I enter using half or quarter position size and then scale-in as/if the trade moves in desired direction. I trade longer time frames, monthly/weekly to identify zones of interest and daily/4hr to time my entry.
Analysis of pre-darwinex era
As you can tell by checking NTO’s underlying strategy, I had a lot of issues in the very beginning of my trading endeavour. When I was on a small account, I fell victim to many beginner’s errors like the following:
- Overtrading - due to a small account, I felt that profits were marginal and I forced many unnecessary trades. I failed to realise that it’s not about the frequency, but the quality of trades. As long as you are winning bigger than losing, even if by infinitesimal amounts, you are beating the game. Bill Lipschutz said: “If most traders would learn to sit on their hands 50 percent of the time, they would make a lot more money.”
- Martingale - I am guilty there too, I confess . I tried to cover a bigger loss as soon as possible by increasing my risk. At one point I was at 52% drawdown. Thankfully, it turned out positive in the end and I was able to bounce back. To be completely honest, I didn’t even know what martingale is back then. I quickly realised how harmful that can be to a trading account and never used it again ever since.
- Winning streak overconfidence - it’s that incredible superman feeling when you think you have everything figured out after a few consecutive winners and you cannot stop yourself from risking more or trading more frequently, thinking that you can squeeze out even more from the setup. Been there, done that . This is probably one of the hardest aspects to control for a discretionary trader.
It’s been a wild journey and I’ve learned a ton from it. The whole history of my learning process is visible to you in NTO darwin, from the first beginnings till now.
Main area of focus moving forward
Because we are all in a Darwinex environment we cannot help but to strive to improve the IA scores. I am no exception. I remember when I joined, the first thing I did was read all the info on investable attributes, to get some sense about what those numbers really mean. Here are the main focus points going in to the future:
- Rs - My priority number one. The score is too low for now and is probably scaring investors away. But this is the penalty I was prepared to accept in exchange for transparency and honesty of showing progress through time. 2019 was a roller-coaster ride (figuratively and literally from the looks on the Rs chart ). My goal is to stabilise the VaR at around 4% with my current account and later with time when I add even more funds (or get larger sums of investments) more towards 2 - 3%. My current account has €10k initial funds and I plan to add another 10k later this year.
- Ex - Because I trade infrequently compared to algo traders and day traders out there, I’ll need a hell of a lot of time to fill this one up. I even stepped out of my comfort zone a bit and started trading a bit more per month (but with lesser risk in order to compensate) than I usually do, just to get there a little bit sooner. Not quite sure if that’s a good idea yet, time will tell. Eventually I will return to my old frequency which is ±10 trades per month.
- La - I’m content with the score and I intend to keep it that way. My winners are currently more than 2x the size of my losers. I only enter trades which have RR of at least 1:2
Have a nice day!