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Darwinia ranking – unfair?

4 February 2016

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!

We receive regular feedback pointing out that the outcomes of the Darwinia contest may not always foster our goal of democratising the markets.

For example, in response to last week’s post, Steven, mentioned:

“have been looking at the Darwins and the ranking. I spotted some traders that traded one of his/her strategies to 98% drawdown, however their respective D-score/ranking were not penalised. I wish one day the ranking algorithm will take into account for fairer outcome. After all I am sure your company do not encourage reckless risk management.
Cheers Steven”

Clearly, we share Steven’s concern – who likes reckless risk management – but as you’ll see, when you decide to do something one way, you have to stick with your decision, even if parts of it hurt.

This post will touch upon several aspects, including the technical details on the ranking, trader incentives, and how to solve this going forward. We sincerely look for input on this one – perhaps with your feedback we’ll find a better way!

Overrule the algorithms?

Darwinia is ranked weighting:

  1. Grades for the DARWIN based on the strategy,
  2. The Level as determined by those grades
  3. DARWIN performance for the natural month and
  4. A measure of activity (to make sure that high level DARWINs win without trading activity don’t contend whilst on holidays).

We’ve covered the mechanics of Darwinia levels elsewhere – the relevant point here is the fact that the DARWIN’s underlying strategy does NOT enter the equation. Which implicitly means that neither do its Drawdown, VaR level, etc.

Arguably relevant criteria like “he’s trading the strategy with very high VaR”, or “the trader traded his strategy to 98% drawdown” aren’t even evaluated. On account of this “shortcoming”, sometimes strategies with “reckless risk management” make the end of month cut for the 20 strategies that are awarded Darwinia capital for 6 months.

Shouldn’t we overrule the algos, draw the joker wildcard and introduce rules so that DARWINs with underlying strategy VaRs higher than X or Y  be disqualified from the contest etc. ?

Tempting! For starters, it may well save us some investing losses. But would that really help the underlying goal, in the long run?

We’ve thought this through, and think there’s a case for laissez faire (at least for now). If it proves too costly we may have to reverse course, but it’s important to share the pros of laissez faire.

We didn't invent this...

We didn’t invent this…

Arguments for laissez-faire

The first is transparency. Not tinkering with the rules.

If we’re the DARWIN exchange listing DARWINs – which are genuinely different from their underlying strategy – and control risk so that DARWINs run on 20% VaR, why introduce the underlying strategy into the investor equation? Doesn’t this send conflicting messages? The last thing we want is anyone accusing us of a non-transparent process.

The second is not judging people’s incentives. There’s enough gambling going on in the markets, and we’re clearly not here to encourage more. Then again, having spoken to hundreds of traders in the last few years, we realised there’s a (possibly small) subset of “rational gamblers”. Their argument is: I only manage e.g. 1000 USD, and I won’t be able to manage a meaningful amount for the foreseeable future. So I trade several promising strategies with deliberately outrageous risk. It’s my personal way to build a lottery ticket cheaper than anything offered in the gambling market.

Not everyone will agree, but provided the underlying strategies work, there’s logic to it. Indeed (some) DARWINs based on high risk strategies get good grades for long-ish periods of time –  compare DARWIN1, 2 and 3 with their underlying strategies. This begs two options. Option A is: the rating algorithms work, and the DARWIN based on the reckless gamble, with “investment grade” VaR, are investable for a while – in which case who are we to hide them from investors? Option B is: the rating algorithms need improvement, and we better get our act together to improve.

We welcome both. Simply “hiding” flaws in the algorithms or high risk in the closet would hurt the transparency of traders’ evolution, and paradoxically reduce everyone’s credibility.

The third is trust in market forces. Underlying strategies will always be visible to investors. Once hundreds of millions in Assets under Management (AuM) back DARWINs, presumably few investors will choose high risk traders, reckless risk however mitigated by the DARWIN, will put them off. Presumably even risk loving DARWIN providers will lower their VaR then… but we’re not there yet – our 0.5 MM capital allocation / month isn’t enough of an incentive for them to lower risk.

And last, but not least, there’s evolution. As AuM grow, Darwinex will both groom better traders in house (focussing on improving pays in the long run) and attract better traders who don’t know / can’t currently be bothered to join Darwinex. Nothing better to crowd out (rational or irrational) punters making the Darwinia cut every month, than higher density of good traders providing investable DARWINs.

When that happens, nothing would please us more than knowing that evolution worked its way through the ranking, without tinkering. Until then, the reality is that 90% of independent traders lose their shirts owing to nothing more than excessive risk taking. The only way to fix a problem is to acknowledge it – and that’s where we are right now.

Your thoughts?

Clearly, we couldn’t discuss this with users in length… so what’s your thought? Do you agree? Any argument we’re missing?

 

Last News
dst

Start of Daylight Saving Time 2019

4 March 2019

Please note our amended trading hours for the three-week-long period between the change in the US from EST to EDT on 10th March 2019 and the subsequent change in the UK from GMT to BST on 31st March 2019.

Please note our amended trading hours for the three week period between the change in the US from EST to EDT on 10th March 2019 and the subsequent change in the UK from GMT to BST on 31st March 2019.

 

Instrument Trading Hours in GMT
FX 21:05 Sun – 20:55 Fri (except 21:00 – 21:01 daily) 
DARWINS 21:05 Sun – 21:00 Fri (except 21:00 – 21:01 daily)
COMMODITIES  
Gold 22:01 Sun – 20:55 Fri (except 20:59 – 22:01 daily)
Silver 22:00 Sun – 20:55 Fri (except 21:00 – 22:00 daily)
Platinum 22:00 Sun – 20:55 Fri (except 21:00 – 22:00 daily)
Palladium 22:00 Sun – 20:55 Fri (except 21:00 – 22:00 daily)
US Crude 22:00 Sun – 20:55 Fri (except 21:00 – 22:00 daily)
Natural Gas 22:00 Sun – 20:55 Fri (except 21:00 – 22:00 daily)
INDICES  
Australia 200 22:00 Sun – 20:55 Fri (except 21:00 – 22:00 daily)
Europe 50 22:00 Sun – 20:55 Fri (except 21:00 – 22:00 daily)
France 40 22:00 Sun – 20:55 Fri (except 21:00 – 22:00 daily)
Germany 30 07:00 – 21:00 (Mon – Fri)
Spain 35 07:00 – 19:00 (Mon – Fri)
Japan 225 22:00 Sun – 20:55 Fri (except 21:00 – 22:00 daily)
UK 100 22:00 Sun – 20:55 Fri (except 21:00 – 22:00 daily)
US SPX 500 22:00 Sun – 20:55 Fri (except 21:00 – 22:00 daily)
US Tech 100 22:00 Sun – 20:55 Fri (except 21:00 – 22:00 daily)
Wall Street 30 22:00 Sun – 20:55 Fri (except 21:00 – 22:00 daily)
US STOCKS 13:31 -19:59 (Mon – Fri)
CRYPTOCURRENCIES 22:00 Sun – 20:55 Fri (except 21:00 – 22:00 daily)

 

As always, please do not hesitate to get in touch at info@darwinex.com should you need assistance.

Trading Hours for US Presidents’ Day on 18th February 2019

12 February 2019

Please note that the following trading hours will apply on Monday 18th February 2019.

Please note that the following trading hours will apply on Monday 18th February 2019. All times are in GMT+0 (London) time.

Commodities   Monday 18th Febuary 2019
Gold 23:01 Sun – 18:00 Mon
Silver 23:00 Sun – 18:00 Mon
Platinum 23:00 Sun – 18:00 Mon
Palladium 23:00 Sun – 18:00 Mon
US Crude 23:00 Sun – 17:45 Mon
US Natural Gas 23:00 Sun – 17:45 Mon
Indices
J225 23:00 Sun – 18:00 Mon
SPX500 23:00 Sun – 18:00 Mon
NDX 23:00 Sun – 18:00 Mon
WS30 23:00 Sun – 18:00 Mon
US Stocks
All US stocks CLOSED

 


The rest of the assets will trade according to their usual trading time.

As always, at info@darwinex.com we’ll be happy to assist you!

Trading Hours On Australia Day on 28th January 2019

22 January 2019

Please note that the following trading hour will apply to the AUS200 asset on Monday 28th January 2019 due to Australia Day.

Please note that the following trading hours will apply on Monday 28th January 2019. Times in GMT+0 (London) time.


 

Indices  Monday 28th January 2019
AUS200 06:10 – 22:00

 


The rest of the assets will trade according to their usual trading time.

As always, at info@darwinex.com we’ll be happy to assist you!

Trading Hours for the US Martin Luther King Day on 21st January 2019

15 January 2019

Please note that the following trading hours will apply on Monday 21st January 2019. All times are in GMT+0 (London) time. Commodities   Monday 21st January 2019 Gold 23:01 Sun – 18:00 Mon Silver 23:00 Sun – 18:00 Mon Platinum 23:00 Sun – 18:00 Mon Palladium 23:00 Sun – 18:00 Mon US Crude 23:00 Sun – 17:45 […]

Please note that the following trading hours will apply on Monday 21st January 2019. All times are in GMT+0 (London) time.

Commodities   Monday 21st January 2019
Gold 23:01 Sun – 18:00 Mon
Silver 23:00 Sun – 18:00 Mon
Platinum 23:00 Sun – 18:00 Mon
Palladium 23:00 Sun – 18:00 Mon
US Crude 23:00 Sun – 17:45 Mon
US Natural Gas 23:00 Sun – 17:45 Mon
Indices
J225 23:00 Sun – 18:00 Mon
SPX500 23:00 Sun – 18:00 Mon
NDX 23:00 Sun – 18:00 Mon
WS30 23:00 Sun – 18:00 Mon

 


The rest of the assets will trade according to their usual trading time.

As always, at info@darwinex.com we’ll be happy to assist you!

Navidad

Darwinex Trading Hours for the 2018 Christmas & New Year Holiday Period

18 December 2018

Christmas is around the corner! Please find below the Darwinex Trading Schedule for the 2018 Christmas and New Year Holiday Period (all times are displayed in UK time and changes to regular trading hours are highlighted in red). Also note that during the Cristmas and New Year holiday period spreads may widen and swaps may […]

Christmas is around the corner!

Please find below the Darwinex Trading Schedule for the 2018 Christmas and New Year Holiday Period (all times are displayed in UK time and changes to regular trading hours are highlighted in red).

Also note that during the Cristmas and New Year holiday period spreads may widen and swaps may be affected by the ‘turn’ effect. The ‘turn’ effect is a phenomenon that exists in financial markets which is caused by supply and demand for funding over key dates such as year or quarter-end. This can create anomalies in the forward curves for certain currencies, and we are already beginning to see this priced into the year-end swap points that we receive from our liquidity providers.

Christmas 2018

DARWINs Monday 24th December Tuesday 25th December Wednesday 26th December
All DARWINs 22:05 Sun – 18:45 Mon Closed 22:05 Tue – 21:59 Wed
FX Monday 24th December Tuesday 25th December Wednesday 26th December
All FX Instruments 22:05 Sun – 18:45 Mon Closed 22:01:01 Tue – 21:59:50 Wed
Commodities Monday 24th December Tuesday 25th December Wednesday 26th December
Gold 23:01 Sun – 18:45 Mon Closed 23:01 Tue – 21:59 Wed
Silver 23:00 Sun – 18:45 Mon Closed 23:00 Tue – 21:50:50 Wed
Platinum 23:00 Sun – 18:45 Mon Closed 23:00 Tue – 22:00 Wed
Palladium 23:00 Sun – 18:45 Mon Closed 23:00 Tue – 22:00 Wed
US Crude 23:00 Sun – 18:30 Mon Closed 23:00 Tue – 22:00 Wed
US Natural Gas 23:00 Sun – 18:30 Mon Closed 23:00 Tue – 22:00 Wed
Indices Monday 24th December Tuesday 25th December Wednesday 26th December
AUS200 23:00 Sun – 03:30 Mon Closed Closed
STOXX50E Closed Closed Closed
FCHI40 23:00 Sun – 13:00 Mon Closed Closed
GDAXI Closed Closed Closed
J225 23:00 Sun – 18:15 Mon Closed Closed
SPA35 07:00 – 13:00 Closed Closed
UK100 23:00 Sun – 12:50 Mon Closed Closed
SPX500 23:00 Sun – 18:15 Mon Closed Closed
NDX 23:00 Sun – 18:15 Mon Closed Closed
WS30 23:00 Sun – 18:15 Mon Closed Closed
US Stocks Monday 24th December Tuesday 25th December Wednesday 26th December
All US stocks 14:31 – 17:59 Closed 14:31 – 20:59
Crypto Monday 24th December Tuesday 25th December Wednesday 26th December
All Crypto Instruments 22:05 Sun – 22:00 Mon 22:05 Mon – 22:00 Tue 22:05 Tue – 22:00 Wed


New Year 2019

DARWINs Monday 31st December Tuesday 1st January Wednesday 2nd January
All DARWINs 22:05 Sun – 21:59 Mon Closed 22:05 Tue – 21:59 Wed
FX Monday 31st December Tuesday 1st January Wednesday 2nd January
All FX Instruments 22:05 Sun – 21:59:50 Mon Closed 22:01:01 Tue – 21:59:50 Wed
Commodities Monday 31st December Tuesday 1st January Wednesday 2nd January
Gold 23:01 Sun – 21:59 Mon Closed 23:01 Tue – 21:59 Wed
Silver 23:00 Sun – 21:59:50 Mon Closed 23:00 Tue – 21:50:50 Wed
Platinum 23:00 Sun – 22:00 Mon Closed 23:00 Tue – 22:00 Wed
Palladium 23:00 Sun – 22:00 Mon Closed 23:00 Tue – 22:00 Wed
US Crude 23:00 Sun – 22:00 Mon Closed 23:00 Tue – 22:00 Wed
US Natural Gas 23:00 Sun – 22:00 Mon Closed 23:00 Tue – 22:00 Wed
Indices Monday 31st December Tuesday 1st January Wednesday 2nd January
AUS200 23:00 Sun – 03:30 Mon Closed 23:00 Tue – 22:00 Wed
STOXX50E Closed Closed 23:00 Tue – 22:00 Wed
FCHI40 23:00 Sun – 13:00 Mon Closed 23:00 Tue – 22:00 Wed
GDAXI Closed Closed 07:00 – 21:00
J225 23:00 Sun – 22:00 Mon Closed 23:00 Tue – 22:00 Wed
SPA35 07:00 – 13:00 Closed 07:00 – 19:00
UK100 23:00 Sun – 12:50 Mon Closed Closed
SPX500 23:00 Sun – 22:00 Mon Closed 23:00 Tue – 22:00 Wed
NDX 23:00 Sun – 22:00 Mon Closed 23:00 Tue – 22:00 Wed
WS30 23:00 Sun – 22:00 Mon Closed 23:00 Tue – 22:00 Wed
US Stocks Monday 31st December Tuesday 1st January Wednesday 2nd January
All US stocks 14:31 – 20:59 Closed 14:31 – 20:59
Crypto Monday 31st December Tuesday 1st January Wednesday 2nd January
All Crypto Instruments 22:05 Sun – 22:00 Mon 22:05 Mon – 22:00 Tue 22:05 Tue – 22:00 Wed

 


As always, if you have any queries, please feel free to contact us at info@darwinex.com.

The Darwinex Team wishes you a Merry Xmas and a Happy New Year!

apalancamiento esma

UK Parliament Vote on EU Withdrawal Bill (11 December 2018)

9 December 2018

We would like to remind you that the UK Parliament will vote on the EU Withdrawal Bill on 11th December 2018. There is a high degree of uncertainty as to the outcome of the vote and all GBP currency crosses are likely to experience significant volatility with increased risk of market gaps. It is important that you […]

We would like to remind you that the UK Parliament will vote on the EU Withdrawal Bill on 11th December 2018.

There is a high degree of uncertainty as to the outcome of the vote and all GBP currency crosses are likely to experience significant volatility with increased risk of market gaps.

It is important that you have sufficient margin coverage and are comfortable with the exposure on your account as our margin requirements may change going into the vote or depending on the outcome of the vote.

Please feel free to contact us at info@darwinex.com should you need assistance in this regard.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 77 % of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.