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Poll - should VaR have a lower bound?

The last Darwin publishing here which got high DD on a micro low VaR is MYQ with a VaR sometimes not visible on the Rs attribute.

Should the VaR have a lower bound which generates a cap on the replication factor of the trading results of the underlying account, which are multiplied on the Darwin’s trades?

Where should the lower bound and the cap be set?

  • VaR 5 - replication 2
  • VaR 3 - replication 3.3
  • VaR 2 - replication 5
  • VaR 1 - replication 10
  • VaR 0.5 - replication 20
  • no lower bound, no cap on replication

0 voters

Please vote to get the opinion of the community.

1 Like

When it is a post from you or the other, I always hate to intervene, because you take things very personal, but I also hate to see things the wrong way…

VaR 5 doesn’t mean replication of 2.
VaR is variable between 5 and 10%, so personal VaR of 5% doesn’t mean that investors’ VaR is at 10%.
Also, as personal VaR goes down, investors’ VaR tends to 5%.
In my personal opinion, this is the correct list:

VaR 5 - Replication from 1 to 2
VaR 3 - Replication from 1.67 to 3.3 (I think 3.3 is already impossible with a variable VaR)
VaR 2 - Replication 2.5
VaR 1 - Replication 5
VaR 0.5 - Replication 10

I think personal VaR should not be touched. It is the trader that decides how to operate and if his strategy achieves a low VaR, it’s his business and investors should be aware of the effects.
In another post, I proposed a variable VaR in a range 4-12%.
I think, in that case, the list would be much more flexible:

VaR 5 - Replication from 0.8 to 2.4
VaR 3 - Replication from 1.33 to 4 (again, I think 4 is only a theoretical case with this system of the VaR)
VaR 2 - Replication 2
VaR 1 - Replication 4
VaR 0.5 - Replication 8

Also, I want to add that having a wider range is positive, not negative.
It may look like having a wider range, the multiplier is changing even more frequently, but it’s the opposite.
Consider a trader with a personal VaR at 4% and a current multiplier of 2, so investors’ VaR is at 8%.
With the current 5-10% VaR, the multiplier will always be 2, unless investors’ VaR goes above 10% or below 5%.
This means that investors will always follow the same curve as the trader, unless personal VaR for the trader goes below 2.5% or above 5%.

In case of a range 4-12%, investors’ will always follow the same curve, unless personal VaR goes below 2% or above 6%.
This guarantees more room for investors to continue to follow the same activity as the trader, without having to change the risk too soon and give space to luck.

In the case we have experienced in March, personal VaR at 4% could have gone to 5% in even a couple of days, without allowing the trader to figure out what to do to stop the multiplier to go down. I think that that extra 1% given by the range I’m proposing, would have been very handy for the trader to think about what to do before seeing the multiplier going down from one day to another.

Why didn’t you vote?

You write tons of words again without a useable content, sorry. This thread was not opened to discuss VaR or your thoughts without a result with you again.

The question here is: do you want a cap on replication triggered by VaR or not? If yes, where?
Do you have an opinion or not?

1 Like

I didn’t vote because the list is incorrect and anyway there’s no option I would choose, as I also wrote in my post. I had no doubt about a kind of reply like this from you.

The list is correct for the simple intention behind it and the poll. And that is to find out whether there is enough support by members for a demand to set a cap on the replication to prevent Darwins like MYK and their investors from huge DDs. That’s written in the introduction of the poll.

You always see 10% as max. target risk on a Darwin, regardless what’s calculated as traders VaR in the background.

For a poll it is a disadvantage to make it more complicated than necessary or describe a hidden logic.

The sad thing is that you don’t understand the simple idea behind the poll, but write comments here with hundreds of words about your point of view which are off topic to this poll, but not to VaR.

That is very destructive and that is what I really dislike on some posts of you, nothing personal. It would also help if you would bring your (too) long posts in a structure that you first write your opinion or the point and then your long explanations which must not be read necessarily.

It is not my point of view, it is common knowledge that you can learn through Integracore’s videos.
VaR 1 can never lead to replication of 10 and VaR 0.5 can never lead to replication of 20. It is simply wrong.

I’d like to suggest that @IlIlIlIlI and @FedericoSellitti refrain from commenting each others’ posts at least for a time and consider muting the other in their Preferences. Sometimes it’s just not possible to understand each other. Then the wisdom lies in knowing when to stop engaging.

3 Likes

@bianka
I agree with you, but please remove the inappropriate and destructive content, at least this one because it’s not true as I explained above:

Here we go, I have modified my post.
You can just ask, no need a moderator for that. I’m not here to shoot at you, I noticed something that was not right and I shared my point of view together with common knowledge that Integracore shared on YouTube.
Anyway, from my side, there is no anger or desire to diminish the other or see him failing.
My post was to clarify some points that were not accurate and I would have done it regardless of the author of the post.
I have better things to do with my time than subscribing to the IlIlIlIlI magazine and “attack” every time he writes something.
When he posted about the portfolio strategies for beginners, I thought it was valuable content and I had nothing to say but appreciate the hard work. I saw something wrong in this thread and I shared why I think this is not correct. This is it, nothing personal.
I have no intention to mute another user for a disagreement or to continue to post in this thread if my contribute is not appreciated, so I will take your advice @bianka and stop replying here.

Have a good day :slight_smile:

This topic was automatically opened after 4 hours.

The poll is on top there:

I am not a VAR fan, however I understand the purpose of it.

So, why don’t replicate the value of the underlying VAR% for any account trading at any VAR from 0% to 15%%?
So, if I trade my underlying account at 8% VAR my darwin trade at 8%, if I trade at 14% my darwin trade at 14%, if I trade at 0.40% my darwin do it at 0.40% too, if I trade at 22% my darwin to it at 15%.

That would prevent traders to be worried about constantly increase/decrease of VAR, traders would be just focused to trade, not watching how his trading replicate the VAR and affect their results, darwins couldn’t trick darwinex with big equities but risking nothing…, etc…I think it;d be more honest trading, not trading to trick the darwin.

3 Likes

Most extreme one - meanwhile close to its entry price after migration more than a year ago. Current VaR: 0.69 %.


Trading account after nearly 10 years:

That’s one example why I made the poll - besides MYQ.

1 Like

Exactly, so do you thing my proposal to replicate the VAR up to 15% could be the final solution for most scenarios?
EDIT: just to be clear, I don’t have anything against traders who risk very low, I think they are smart playing with the rules on his side. I just think that it is fairer that darwins clone the VAR of the underlying strategy (with a cap to protect investors). But my proposal is not only for those, I think it is better for everybody and any kind of trading.

2 Likes

I prefer your proposal more than the current solution with an unlimited replication factor.
But I think 10% VaR is enough for a 1:1 replication.

I think sooner or later the majority of these low VaR “traders” will fail and the risk manager is not able to keep the investors money in a save place with the current logic.

2 Likes

i think we should let people do what they want. we could argue about which model is more profitable or which is more stable but in the end what matters to me in this issue it to let people chose what they like.

2 Likes

I have been thinking about this topic for weeks!. This is a very relevant post. I have my first Darwin IZU listed in November 2019. My trading account is up 89% and my Darwin is up 17%. I have become a bit disheartened that all the hard work gives such meek results to investors. Apologies for going a bit off piste but this is an important topic if Darwinex wants to also be a platform for non-systematic algo traders.
In my personal view and as long as the FCA approves, I would classify investors in Darwins as Professional or Retail as it happens in any other broker account. Darwinex should set up that possibility. Then I would offer professional investors to choose which level of VaR protection they would like to have, with an option being NONE or Full replication.
For retail investors I would give 2 VaR levels with the current fixed 10% been the low risk option of the range and the high option at least double that risk.
IG

3 Likes

Thank you for your valuable post and your vote! Welcome to the community.

I’d like to vote, but I don’t see my opinion (read above) is reflected in any of the options. I’d like the VAR of the darwin to be the same as the underlying strategy with a cap of 15%. Which option should I vote?

3 Likes