Value at Risk or VaR

You all have read these disclaimers:

“Trading may carry a high degree of risk to your capital”

Indeed, trading is risky. But you’ll probably agree that not all trading strategies carry the same risk. Wouldn’t it be great to have one single risk measure that tells, at a glance, how risky a given trading strategy is?

Forget Max. Drawdown, Max. Leverage or Standard Deviation… at Darwinex, risk is measured in terms of Value at Risk or VaR (note: we do also analyse Max. Drawdown, Max. Leverage & Standard deviation).

Understanding VaR

VaR measures the percentage of loss a trading strategy is likely to suffer in the worst month out of every 20 months. In other words: what is the risk an investor is taking when investing in a given strategy?

Because at Darwinex we know how important risk is when talking about trading strategies, we have recorded a brief tutorial that will help you to understand how we measure risk and why VaR is a powerful way to compare risk across trading strategies! 

Liked it? Your feedback would be greatly appreciated! Trade safe everyone!


Darwinia: the trading challenge for trading skill

This video explains our monthly Darwinia trading challenge: why we run it, how it works, and what to expect if you win the allocation. We hope you enjoy it!

Darwinex is a profit exchange: we pair skilled traders with savvy investors for mutual, long term, benefit.

But finding consistent trading strategies to invest in is not easy. At Darwinex, we have developed proprietary algorithms that allow us to measure how attractive a given strategy is from an investor’s point of view.

Obviously, savvy investors don’t back losers… so how to find the winning needle in the random haystack? Introducing DarwinIA, the trading Challenge for traders committed to financial evolution.

It’s called DarwinIA for two reasons. The first is because of the darwinian selection it achieves: lucky returns count for nothing, so only the fittest shine. The second is because of how it’s done – by scanning for Investable Attributes (IA), skills that tell which trading strategies are worth investors’ capital.

That’s the secret. Like other Challenges, it tracks what returns were. Unlike others, DarwinIA answers HOW returns come about, by scanning every strategy for 6 core Investable Attributes that prove skill:

  • Experience: where returns sustained for long enough to rule out luck?
  • Discipline: does the strategy follow a pattern, deploying S/L and T/P?
  • Risk Management: is there trade and strategy level risk management?
  • Timing: if the strategy opened/closed trades slightly earlier/later would it make more/less?
  • Performance: does it beat random strategies with comparable risk?
  • Scalability: would returns scale if the strategy managed millions, instead of thousands of dollars?

What’s in it for investors? Do you know lucky monkeys capable of passing those filter AND winning at the same time? Wouldn’t you back strategies that win by proving the above Investable Attributes?

What’s in it for investable traders? Visibility! The Leaderboard ranks by investor-worthiness, and it’s credible because 1) as a 100% STP venue – we gain nothing by attracting investors to non-winners, and 2) we’re independent from the traders we advertise.

Last, but not least… what’s in it for YOU? If you’re committed to trading, DarwinIA diagnoses your progress, benchmarking you against others also trading for a purpose: seeding the skills that deliver long-term performance.