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Risk Stability Investable Attribute (former Risk Management)

This is the reason in invest only traders with an active communication channel.

I am not here to defend anyone, but I really think that such a glitch could happen to the most communicative trader in the world, too!

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Maybe. OK.
Let’s transfer the “festive” funeral of this martingale for a few more time. :innocent:

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This is the reason in invest only traders with a Massive Positive excursions > Stable/Same Negative excursions (La >8) so a Constant Risk stability (Rs>8) and not 10-10-1000 successive trade on the Same asset (Martingale powa lol).


Always the same issue !!!

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@ignacio
Here we have a lot material for the article:
https://community.darwinex.com/search?q=martingale

and this is still running:
https://www.darwinex.com/darwin/CKV.4.11
nice rollercoaster of VaR ! :sunglasses:

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http://blog.darwinex.com/identify-overfit-trading-strategies/

Martingale can be considered a subcase of Risk-focused overfitting .

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Hi hope this is the right topic for my argument.
After a few months here on Darwinex with my DARWIN (BSL) I’m learning more on how the investable attributes work. Reading and studying it’s always different from learning on the field :wink:
In particular I think I’m understanding better the Risk Sability attribute and especially how the monthly VAR works.
In the last month my DARWIN realized a DD and a volatility superior than past months and so the “channel” of the VAR increased from 12.5/10 to 14.14/9.94 %
In this way the difference between my underlying strategy (US) and the DARWIN was accentuated… in better for having a lower DD (8.46% vs 10.66%) in worse for losing upward gains (+3.06% in the last month the US, +0.82% the DARWIN). But this is not the point.
Knowing this while I was looking at other DARWIN I noticed something strange and maybe worring. If you look at PME you will see that his VAR in the last 2 months has gone very lower than before (now … 2-32/0.79%) and so the D-laverage is now over 20 from 6-8 that it was for the firt six month of the year… for now all worked out very well for the investors, but I can’t notice that the extreme leverage was reached because in the last few months there have been few trades.
So my point is… what will happen to the investors when (and not if) the US will incurr in a DD similar to those happened before?
I think the Risk Manager is the best think of DARWINEX and a really great tool, but in this case maybe, if I’m not missing something as I hope, it can increase extremely the risk instead of reducing it.
Am I wrong?

PME is a clear example of a trader that isn’t caring about VaR and about the importance of keeping a stable risk profile.

A darwin is like a car, you have to learn to drive it.
BTW I think that understading Rs chart is much easier than beating the market.

I understand your point of view CavaliereVerde, but car now do have ABS and self assistance guide… and if not for the driver we must care for the passengers :wink:
In particular if my reasoning is right it’s possible for DARWINEX to make some adjustment … like don’t let the D-Leverage increase so much compered to his long time moving average… or even let the trader decide wich is the limit he wants.
I myself when I was in the first month here at DARWINEX noticed that at the end of the first month I would have been able to make my DARWIN but I noticed that my VAR would have been understimated… so in the last ten days I deliberated pushed my trade activity to get a bigger VAR more in line to that I will have maintained in the coming months.
This apply even to algo trading … because there could be time with less volatility and with less activity that decrease the VAR without reason.

I think noob investors will rush into PME blinded by a Return of 90% and DD 11% , they will learn the hard way the importance of DScore.
As we were saying, DScore is a very good filter, it is an indicator of the quality of a return.

Dscore is indeed decreasing but I don’t blame PME: he is doing a fine job except probably he does not understand well what does it mean to have a so low VAR for his DARWIN. (ok, low and instable)

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I would rather worry about his Divergence, even with his small investor money.

To the topic, i think VAR calculation is not perfect, but pretty good. I think it is nearly impossible t have a straight line and always same VAR of the underlying account, just one “hack” is there, if you add/remove money and start to trade with same money every day with a very high risk (Var 100%). That’s the only way to get the best Rs ;D But it “kills” the underlying strategy chart.

In your example the system is penalizing that your are using a martingalish approach, it got clearer after first bigger Drawdown, and much higher leverage as usual. This way Darwinex want to protect investors from to much gambling in future. It is very unlikely you will have a very stable Rs over a long period.

I think PME is doing a good job and isn’t a gambler but a trader working here since more than 2 years should have a better understanding of VaR and the importance of Risk Stability.

A perfect score isn’t mandatory but if you aren’t a martingale it is quite easy to stay above 7 , that is more than enough to prevent unstable movements on your darwin.

In your example the system is penalizing that your are using a martingalish approach, it got clearer after first bigger Drawdown, and much higher leverage as usual. This way Darwinex want to protect investors from to much gambling in future. It is very unlikely you will have a very stable Rs over a long period.

Are you talking about my BSL? It’s not martingalish! You can call it “average down” or using all the leverage when is the right moment. Also the D-leverage was slightly less then in the pass (before the bigger DD I had). But I know how it works Darwinex and it’s correct in this way.
But the point here it’s not when one exceed in using leverage, it’s exactly the contrary. If the Underlying strategy does have a period of low leverage and low volatility this can be dangerous for the DARWIN even if the trader or the Algo are doing a good job.

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A perfect score isn’t mandatory but if you aren’t a martingale it is quite easy to stay above 7 , that is more than enough to prevent unstable movements on your darwin.

If you reach to have a low Volatility in you trades, then you will get a low VAR. But if this change over time (was just a lucly period) then you VAR increase again and your RS will get lower.

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If the market changes volatility or you strategy changes activity you have to compensate with small deposits/withdrawals.

i know it’s not 100% a martinglae, but averaging down is not far from. At least nothing for stable Risk :wink: and hard to backtest (difference between position and trade)

If the market changes volatility or you strategy changes activity you have to compensate with small deposits/withdrawals.

I think that this is the problem. I understand that to keep investor safe DARWINEX must reduce leverage when VAR keep rising… (and THAT’S the real magic in the DARWIN) BUT rising leverage when VAR decrease and to the extreme reach a level of leverage 5x the “historical one” is very risky for investors.

I think that DARWINEX should reconsider this and at least let the trader decide wich maximum leverage should the DARWIN use.

Then we would be ne money managers, which is pretty hard to do legaly in most countries. Here i germany i would need a job qualification (3 years) and after that a job in a “leading” position for at least 1 year. So nearly impossible if you don’t plan this from school on :wink:

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i know it’s not 100% a martinglae, but averaging down is not far from. At least nothing for stable Risk :wink: and hard to backtest (difference between position and trade)

Anyway I have 6.9 in Risk Stability, not so bad :slight_smile: What is stability then? I know that I will in the future have another time of DD (I hope very distant from now!) and that I will then have up to 8 contract (all of them of the same size) and so my D-leverage will go up (but no more than that…) and that if I go down more than 10% I will close the position and take all the losses. It’s not stability this? In fact I think that going forward my Risk Stability should increase despite the DD.