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Understanding better how divergence works

Hi everyone,
I read a lot about divergence and I’m sorry to open another thread about it. Just want to have a confirmation from someone who has more experience and understands this better than I do.

I opened a demo account to follow my Darwin. When I followed it yesterday, divergence was at -0.01% (I suppose because the position I had with the Darwin was already on the market, but not sure about it).
Today, I see that divergence is fluctuating between -0.02 and -0.03%.
From what I understand, this may be mainly because my Darwin is in GBP and my investor’s portfolio is in USD (and probably also because I have only one trade, right on GBP/USD).
Also, another small reason I thought of, is that the SWAP I paid with the Darwin might be different from the SWAP I pay as an investor.
Someone that can help me to clarify my doubts or highlight something that I’m missing? :pray:

No, what you described is only a calculation but not a trading result.

Divergence is the difference between your fill on your trading account and the fill on the investor account. That depends mainly on delay between both fills on the accounts, trading volume and the time the trade is executed.

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Giving that divergence only depends on this, shouldn’t it depend then only on executions (entry, stop loss and take profit)? I don’t get why it is changing during my trade.
I followed my Darwin yesterday and I still have the same trade (only one).

It depends only on executions, you got that point completely.

The risk manager calibrates your position and also these unvisible small trades made only on the investor account will count for divergence.

Simple - inaccurate - example:
If you have 2 % drawdown on your trading account and a VaR of 5 which duplicates the result the simple PAMM calculation would be that your investor account has about 4 % drawdown. In reality - because of the risk manager - your investor account loses only 3 %.
So what did the risk manger? It closed a real micro portion of the investment of each asset. These small closing trades also count for divergence. If that happens at 1 o’clock at night when all assets have high spreads, it would increase your divergence.

These risk manager closings must be added for all investor accounts at Darwinex and the net value will go to the market. This market fill will be the calculation base for the divergence and a potential change.


Sorry to bother you again on this.
Let me see if I understand this right.
So the VaR is fixed at 10% for investors. When I open a trade (considering I only have one trade on the market), the Risk Manager says: “hey, you are following this trader with fixed 10% VaR. You have $10,000, so you put $1,000 of your money on the line for this trader for this month (since I understand that VaR is a monthly indicator)”.
Now the risk manager supposes that I could lose the entire $1,000 in that position (I don’t know if it is correct and, if it is, I don’t know why). If my risk increases, for example I add to my position or simply for the overnight spread, the risk manager intervenes to reduce the exposure of the investor on that Darwin, causing divergence. Is it correct or I’m dead wrong?
Thanks a lot for your help!

Divergence is the difference between darwin and the investment that follows the darwin.
How the risk manager works and transforms you strategy into the darwin is a completely differnt subject.

VAR - how does it remain constant?


Simply put, because your Equity changes.
The divergence is a fixed amount I think, but since your equity changes, the % value changes with it.

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Then I’m dead wrong :rofl:
Honestly, I don’t want to change my system and I don’t really care about some parameters, but since there are some people who want to invest in my trading activity, I’m trying my best to get a knowledge about the parameters that could be dangerous for investors. My understanding is that divergence is one of these important parameters.
I read a bit here on Darwinex and also followed the YouTube video on Darwinex’ channel, but still seem not to get even half of it.
Is there any source you would recommend to study this better?

I think in the video I followed by Darwinex, they enlisted the factors that could affect divergence.
I took some notes and I have: base currency, latency and investor volume.
From my experience as a trader, I think the third one is related to the second, since a higher volume is harder to place on the market, causing slippages and different prices for the trader and the investors. But equity is totally new to me as a factor that plays a role for the divergence.

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You are right, volume can slip the price but with latency they mean only the milliseconds of “ping” between MT client and server.
Latency is the delay beacuse of the network not beacuse of the market.

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@CavaliereVerde read your edit, thanks.
I think I understand how VaR works. If I have £5,000 with a position of 0.10, I close my position, I deposit £5,000 and re-open the same position, but with 0.20 volume, the VaR should be constant, if I understand this right.
Regarding the risk manager, I think I have to study that better. Thanks for sharing!

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