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Risk Measurement at Darwinex - English Tutorial Series

Hi everyone :slight_smile:

Firstly, a BIG thank you to everyone in the Community for all the feedback, comments and suggestions you’ve shared with us over time as regards content, tutorials, podcasts and blog posts - much appreciated! :pray:

We’ve been working hard behind the scenes these past few months, to create high quality content in video, audio and text formats, to serve both Spanish and English-speaking audiences.

Darwinex is a universe on its own in terms of technology and trading terminology, resources for which have been produced via content on https://help.darwinex.com and via Webinars and Podcasts conducted regularly by members of our team.

To complement those efforts, @javicolonbo and @integracore2 have been working together recently on several video tutorials to really bring out the WHY and HOW of Darwinex concepts, technology, terminology, metrics, algorithms, the risk manager and more - for the benefit of all Darwinex users.

The first of these series (in English) focuses on concepts centered around Risk Measurement, and was initially launched on the Darwinex YouTube Channel in Spanish (link to ES playlist).

Here are the first 6 videos of this series:

NOTE: Each video assumes that the viewer has watched the videos before it… it is therefore strongly advised that you watch each video in the order presented below and/or in the YouTube playlist… thank you!

1) Money Management & The Risk of a Trading Strategy

2) Measuring the Risk of a Trading Strategy

3) Measuring the Risk of a Trading Decision (D-Leverage)

4) Calculating the Risk (D-Leverage) of a Position

5) How Value-at-Risk (VaR) is calculated at Darwinex - Part I

6) How Value-at-Risk (VaR) is calculated at Darwinex - Part II

7) How is Leverage Replicated for DARWIN Investors

8) Why High VaR Trading Strategies Don’t Survive Long-Term

From here on we’ll be shooting a whole new video series dedicated to the INs and OUTs of the Darwinex Risk Manager :muscle:

We aim to produce these tutorials on a regular basis, and would greatly appreciate any and all feedback you may have for us along the way.

Enjoy the content & have a great weekend ahead! :pray:

Best,
Ali Saif

21 Likes

Good morning everyone :slightly_smiling_face:

We’ve added two new tutorials to the original post above, where we describe and demonstrate how we calculate the Value-at-Risk of a trading strategy at Darwinex.

These two tutorials should hopefully shed light on this popular subject in the Darwinex Community - we’ve gone into it in a great level of detail :muscle:

Enjoy the content & have a great day ahead!

Best,
Ali

9 Likes

Good day everyone :slightly_smiling_face:

We’ve added a new tutorial to the original post above, where we explain how leverage is replicated for investors in DARWIN assets, particularly in cases where the Underlying Strategy is operating with a high monthly VaR(95%).

Enjoy the content & have a great day ahead!

Best,
Ali

6 Likes

Happy Friday folks :slightly_smiling_face:

Today we’ve added the final tutorial in the Risk Measurement Series to the original post above, where we explain why & how high VaR trading strategies are unlikely to survive in the long-term.

The tutorial uses a series of examples to highlight what constitutes a safe range of Value-at-Risk to operate within, and why it makes sense to leverage investor capital instead of employing excess or disproportionately high levels of leverage on proprietary capital.

Enjoy the content & have a great weekend!

Best,
Ali

10 Likes

Congrat for theses interesting videos.
About the last one I have few remarks :

  • 20 pips is a 0.2% variation only when one Euro = one Dollar. Usualy, the approximation is quite good but sometime not : AUD, NZD… (MP currencies), also EUR was =1.5 USD ten years ago. That does’nt change the validity of your demonstration.

  • 40% risk for one trade is an extreme exemple for demonstration, but far from reality. It come from anti martingale effect besause of proportionnal MM (more EC, more lots), then win trade with less lots and lose trade with more lots, in a random distribution of win/lose. The real question is : what if a hight risk but rather low in comparison with 40% risk per trade : is this effect (anti martingale) neglictable or not ?

  • Last, a VAR between 20% to 30% is not acceptable. Because VAR is underestimated in average, because of two effects : alpha would possibly be only from survivor bias. VAR computed from a short track record dont have enought DDs to evaluate rare events (there is only one MaxDD).

Thanks for your great work.
Best.

3 Likes

Thank you @CondorcetInvestment and @FedericoSellitti for your fantastic questions/remarks - much appreciated :slight_smile: :pray:

As your questions cover a few subtopics themselves, we’ll include relevant subject matter around these in future video tutorials :+1:

This way it will benefit everyone else’s understanding as well - stay tuned for the Risk Manager series of video tutorials :muscle:

p.s. Just one quick note @FedericoSellitti -

In the last video tutorial that you’ve referenced in your post, the discussion in the video was about Underlying Strategies, not DARWINs.

Just making sure this is clear since in your post you’ve said the following:

… which is not what was said in the tutorial :slightly_smiling_face:

4 Likes

Amazing! Thanks :smiley:

1 Like