DARWIN backtesting tool

New feature: DARWIN Backtesting Tool

The DARWIN backtesting tool calculates and visualizes the return, P&L, performance fees accrued, and the final equity of any DARWIN investment porfolio you create.


Search for Investment Strategies with the DARWIN Backtesting Tool

The DARWIN backtesting tool is useful when searching for investment strategies because it enables investors to know the aggregated past evolution of a portfolio of DARWINs.

The backtest’s curve enables investors to evaluate the correlation, the risk taken, the profitability, drawdown and form of return generation.

Another use of the backtest consists of comparing the performance of a real investment portfolio with that of the same portfolio in the past. The more future curves resemble past ones, the more robust the portfolio. Past curves can also orient us as to where to define stop losses and take profits on the portfolio level.


How to Generate a Backtest Step by Step

  1. Get started by first setting the starting date of the simulation.
  2. Set the capital invested in the portfolio.
  3. Select your desired leverage.
  4. Then select the DARWINs you’d like to add to the portfolio. You can add DARWINs by using the search feature or by selecting them from a list. The lists available are those of all DARWINs, the default filters, your custom filters or that of the DARWINs you currently have in your real portfolio.
  5. Once you’ve added the DARWINs, you’ll see that their weight in the portfolio gets distributed evenly.
  6. You’ll also notice that after adding the DARWINs, the backtest gets instantly calculated and visualized.


How to analyse the backtest

The backtest’s result is divided into a section with the totals and a section with charts.

In the row of totals you can check out the return, the P&L – in your Wallet currency -, the performance fees paid to the traders and your final equity which is the sum of your invested capital, your P&L and the paid performance fees.

The chart section offers various types of visuals.

By default, the chart will show return percentages in a line graph. The red line represents the evolutions of the backtest’s total while the other lines show evolution of return of the individual DARWINs that compose the portfolio.

By placing the mouse cursor over the chart, you’ll see additional data: exact returns of the backtest and individual DARWINs with the highest returns.

You can also zoom into the chart at any point you wish to.

If your choose to visualize the backtest in an area chart, you’ll keep seeing the red line with the backtest’s total return surrounded by a grey area representing the oscillation of the return of individual DARWINs in the portfolio.

Finally, you can choose to see evolution of P&L and performance fees. You’ll be able to see evolution of the P&L of the portfolio, of trades and that of performance fees paid to traders. P&L of the portfolio is the result of P&L of trades minus performance fees paid to traders.


Investor divergence and performance fees, both factored into the backtest

A backtest’s final accumulated curves include investor divergence and performance fees paid to the underlying trader.

It is thus normal that backtest results don’t correspond exactly with the constituent DARWINs’ returns.

It’s because of this characteristic that it’s useful to run a backtest even with a sole DARWIN. While the DARWIN’s curve – on the DARWN’s page – shows notional return (without divergence, without performance fees), the backtest will show actual return including investor divergence and net of performance fees.


How to share your backtest

The tool has a sharing feature providing you with a URL that’ll show the backtest to people loading the URL in the same way as you see it.

If you prefer, you’re welcome to share the backtest directly on Twitter, LinkedIn or Facebook.


What do you think about the DARWIN backtesting tool? As always, we’re eager to hear your feedback and comments.

darwin purchase price

New Feature: The Effect of Spread on a DARWIN’s Purchase Cost

We’ve released a new feature affecting the process of buying a DARWIN which will benefit especially those investors who practice active investing with DARWINs.

It’s called “Quoted price” and incorporates the buying cost of a DARWIN due to spread.


Initial negative divergence and its root cause

There are investors who, due to the type of investing they practice with DARWINs, systematically receive an initial negative divergence upon buying.

This happens especially if they buy during the last 60 minutes before daily market close.

The quote of some DARWINs decreases during this period, therefore it could appear that there’s a buying opportunity, but this decrease is solely due to the widening of the spreads of the underlying assets.

When buying such DARWINs during this period, investors experience an immediate negative divergence in their investments.


How is the “Current quote” calculated?

We calculate the “Current quote” based on the sell price of underlying assets, i.e. the current quote shows the price for the investor who is already invested in the DARWIN.

 

buying cost of a DARWIN


How is the new “Quoted price” calculated?

If the DARWIN has an open underlying position at the time of purchase, the buy price of the assets is used for buying the DARWIN.

Buy prices are higher than sell prices due to spread, especially during the aforementioned period.

The “Quoted price” displayed from now on includes this difference and lets investors know beforehand the negative divergence their investment will experience immediately after buying the DARWIN.

 

quoted price


Additional alert to discourage buying

If the difference between the current price and the quoted price is 0.30% or more, we show an additional alert in order to discourage investors from buying the DARWIN at that moment in time.

The alert goes as follows: At the present time, the quoted price at which you can purchase this DARWIN appears to be abnormally high. This is most likely due to a temporary lack of liquidity in the underlying assets the DARWIN is currently invested in.

 


We hope you find the new feature useful in your investing.

And as always, we’d love to hear your comments and feedback!