Greetings on the behalf of our Darwin THA and Finbou.com!
First and foremost, we would like to thank all our investors! Hopefully we can continue to provide performance that corresponds the trust given to us. We’d also like to thank Darwinex for providing an excellent platform where traders can interact with investors.
Below you can find a link to our Darwin, description of the strategy and some frequently asked questions (will also add one on our website due course). We will try to adress further questions in weekly basis, if there any (we are currently just a two man team and a bit stretched on time).
Description on the strategy
How do you stay ahead of the market
We trade strictly post-event aftermath and operate with information that is known to everyone, therefore, we don’t need to predict anything else than the price action. The underlying idea is that although we cannot predict the outcomes of events accurately (nobody can in the long run), we can predict what kind of scenarios could occur and therefore the corresponding price action.
The main reason why we are able to profit from this idea, is that we are able to interpret information (and its impact on the price action) better than other market participants. This is based on the fact we have spent thousands of hours researching, planning and trading these events and the general public and even the much more sophisticated traders than us tend to operate under the misperception that the price behaves either randomly or efficiently during the immediate release time.
We calculate the risk per event, not per trade and we always scale into positions. Example
• Account size 10000$ and pre-defined risk for the event 0.5%
• We have three positions on with 0.1 lot trading at break even.
• We have set up SL 10 dollars per each trade (taking commissions into account)
• Our risk for the event would currently be 0.3 lot and 30 dollars i.e 0.3%. We could still add risk (0.2%) and would still be within our pre-defined risk thresholds. If we had lost or made profits during the event before these positions, would be naturally considered in the risk calculations i.e if we had already lost 20 dollars, we wouldn’t take more risk anymore.
The risk is never fixed. Although we have various parameters for determining when we should exit our losers, as an generic example, if the price doesn’t behave as expected, we typically get out before the pre-defined risk limit for the event is reached.
Note the risk per event varies depending on a variety of factors, the quality of setup or scenario, market condition etc. Typical risk per event is 0.15%-0.8% of equity. Risk per event can be up to 4% per event if its high conviction. Such signals have occurred only twice in 2017 though.
Also note the pre-defined risk for the event is the combined amount of stop losses. The 4% risk may be exceeded if the stops don’t hold, so we cannot quarantee the 4% risk. However, such instances have not occurred before. Furthermore, before August 2016, we were trading with 8% max risk per event, which explains the higher intraday drawdown.
Periods of no trades
We only trade when there are news events which we perceive may trigger volatility. There's no reason to be in the market if the events turn out as expected and there's no volatility. Alternatively, even if there is volatility, sometimes we perceive the pricing is correct, too random or too risky to justify entries and thus there are no signals.
Typically, each month, we trade on about 4-7 trading days - the typical interval between trades is therefore 4-7 days. You can see most of the events from various FX-related calendars. The last week of the month is typically very quiet.
In isolation, this also implies investment period should be longer than 6 months, as often there simply are not that many interesting events to trade.
We have seen most discretionary traders blow up after they start managing investor funds, how are you different?
Our advantage regarding psychology is that the trading strategies are broadly standardized, i.e. entry points, risk, reaction function etc. to any given scenario are strictly pre-defined in the trading plan. If something that is not pre-defined occurs we don’t typically trade, or the risk is lowered significantly. Furthermore, we have no obligation to trade and may go through periods with taking very low risk - we know there will eventually events which are tradeable - we just have to be patient.
This approach effectively takes away the pressure to trade faced by most of the traders. We started managing investments at the start of 2017, so as hard evidence, we can only refer to our short track record since the start of 2017. However, the performance is entirely in parallel with the previous years (i.e. 2015/2016) or even better if you so want since the risk-adjusted returns have never been higher in terms of return/drawdown.
Low capacity in Darwinex and different returns compared to our Main Account in MyFXbook
We find the low capacity factor of Darwinex quite perplexing, given we typically shoot for 30 pip minimum on a trade. It might be because a lot of the trades are closed at break-even or a small loss immediadetly if the market does not move in our way (this may lead to some falsely interpreting our trading methodology as scalper).
We are not sure why, but Darwinex seems to be trading at slightly higher risk multiplier than our main account. This means approximately 1.3x higher risk for Darwinex account than our master account.
Are you personally invested?
We are invested ourselves with various risk setups for around 150k. This is not reflected in the Darwinex equity, however.