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OPK – Mallku

I recognize that there is only so much you can do. You manage your risk very well by risking well under 0.5% per trade. I see some issues with risk manager.
It’s great to see that you are so open about what and how you trade. It clears the situation and shows what is the problem.
Thanks for being open about the situation.

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In my opinion it is better to keep a VAR of at least 5%, in general for all strategy providers.

I agree @CavaliereVerde. We’re trying to reach that VaR

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In my opinion there will be always problem if risk manager applies same VaR to every trader, whether it is 5% or 20%. I just can’t imagine how that could work. Maybe I will learn when 5% will be available.

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In my opinion, DARWINEX have a perfect system to scalping or intraday traders, but no for swing traders like me.

Sometimes the market remains in range for a long time and for a swing trader makes perform few operations, smaller, and short time. So that the VaR of the underlying strategy decreases. And this makes DARWIN volatility greatly increase.

Hi Mallku,

The underlying strategy of my DARWIN ERQ also has a very low VaR. The current Risk manager algorithm seems to expect every DARWIN to experience a drawdown of 20% or more once every twenty months. If a trader always trades like a machine with stable D-leverage, constant trading frequency and the same duration, then the VaR will be extremely stable and the Risk Management score will be close to 10, and therefore the replication ratio between the DARWIN and the strategy will be a constant. In this case, the DARWIN is expected to have a drawdown of 20% once every twenty months.

However, most traders are not machines, and markets are always changing. If the strategy suffers a single big loss or a stream of moderate losses (OR the market conditions are not very favourable), the trader may want to decrease the leverage, reduce trading frequency and shorten trade duration, so that the drawdown can be limited to a predefined level (It’s called Risk Management), and more importantly the trader can rebuild confidence quickly. But these kinds of operations will lead to a decreasing VaR. The replication ratio of the DARWIN will increase. It is like the trader wants to avoid big drawdowns, but the Risk Manager algorithm always expects all DARWINs to have 20% drawdown once in 20 months. The situations will get worse when the strategy’s VaR is very small. Suppose the VaR of strategy A is 10% and the VaR of strategy B is 1%. If the VaRs of the two strategies decrease to 9.5% and 0.5% respectively, the replication ratio of DARWIN A only changes slightly but that of DARWIN B doubles.

Since the maximum VaR of a strategy is naturally 100%, the minimum replication ratio of a DARWIN is therefore 1/5. We have a natural VaR ceiling for all strategies. However, the minimum VaR of a strategy can theoretically be infinitely small, so the maximum replication ratio of a DARWIN can be an infinite number. I suggest that Darwinex should set a VaR floor for all strategies. The value of the VaR floor can be discussed. Suppose that Darwinex sets the VaR floor at 4%, the maximum replication ratio of a DARWIN will be 5. If a strategy has a VaR of 1%, then the replication ratio is still 5.

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Hi @OakLadder it seems a good idea, a VaR floor, i agree with you. I’m Spanish and i only speaks English a little bit, so It is hard for me to explain myself well in that language and send a suggestion, but i agree with you.

Regards

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@Mallku
I see that you are trading shorter timeframes, so your average trade is becoming smaller (less pips for stop and target).
If you are risking less pips you have to increase the pips value increasing the size of your trades ( if you trade with 0,01 increase to 0,03).
Another way to raise your VAR to a decent level is withdrawing money from the trading account: now you have 7000, you could leave 2000 or 3000.

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@CavaliereVerde, thank you very much for your feedback.

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CiclosEW: Radical change in the underlying strategy

More info: http://www.ciclosew.com/cambio-radical-en-la-estrategia-ciclosew/

Regards

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Here is the concrete exemple of alogos killing the trader job and investors portofolio.

But you can’t controll the var, is impossible.

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Have you contacted Darwinex? What is Darwinex doing to help with this? With 30% down in two weeks I am starting to lose trust in risk manager algo.

It seems darwinex has understand the probleme and is going to make some changes but what I’ve read make me fear even more.

Currently the VaR of DARWINs is 20%. CiclosEW VaR is 0.5%.

At this time, it is what we have. I’m not comfortable working with this VaR and I made the decision to change it. Notice to investors change will occur and give them time to take the decision they deem most appropriate.

Regards

Algos are doing perfecly fine job. Really good job and I trust them 100%.

Solutions are simple:

  • Darwinex need to lower VAR to a comfortable level. That is the fact.
  • Traders need to keep their risk stable. If you risk 1% per position, then risk 1% most of the time. (you can occassionaly reduce risk, algos wont adjust it, if you occassionaly increase risk algos will adjust it immediatley)

But if a trader changes risk style, you can sure bet algos will kick in.
Remember. “Apples to apples comparable”.

Trader must be aware of his risk ratio to Darwin, and if he is making big changes, he must calculate that.

You can’t control Darwins VAR becasue it is desiged to have stable VAR and algos will be always aiming to that level.
I might be wrong, but this is how I view it.
Example that a trader decided to reduce his risk on his tradin account, twice. He can lower VAR on Darwin but for a very short time because lower risk on traders account is his new trading style, so algos are now calculating form that new risk level and are always aiming for perfect stable green line VAR 20%.

It is important for trader to keep his risk stable. It doesn’t matter at which level, just stable!
.

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I think you are spot on. And once a trader trades with superlow var (look at the risk attribute in ERQ or OPK … its almost a zero lline), the riskmanager will increase the risk for the darwin by a ridiculous amount and therefore the Darwin will almost certainly be exceeding the 20% var sooner than later

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So when a trader see changes in the market conditions and decides to lower his risk to protect himself and potential investors he is doing great thing.
Some traders are great risk managers and they change their risk according to market conditions and volatility.
But here I think it is considered to be a very bad thing.
I fully disagree.
It seems if you do not plan to keep stable trading risk do not release your Darwin.

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You dont manage risk just by reducing risk% per trade.

I am in the process of reducing risk right now. Bad performance from beginning.
I will keep the risk % totaly the same, instead I will reduce number of trades and I will wider stop-loss positions. So less chop-chop days like they are present at the moment.

I agree with you. There are many techniques how you can lower overall risk on your trading account.