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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?

 

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Choose among several banks when sending funds to your Wallet

13 September 2018

When sending funds to your Wallet via bank transfer, you can now choose among several banks. These banks are: – Santander UK – NatWest – Banc Sabadell London Choose whichever you prefer as the destination bank of your monies. After When clicking “Next”, you’ll receive all the details for the bank transfer on the screen […]

When sending funds to your Wallet via bank transfer, you can now choose among several banks. These banks are:

  • – Santander UK
  • – NatWest
  • – Banc Sabadell London

bank transfer options

Choose whichever you prefer as the destination bank of your monies. After When clicking “Next”, you’ll receive all the details for the bank transfer on the screen and via email.

Amended Trading Hours due to U.S. Labour Day on September 3rd, 2018

30 August 2018

Please note the amended Darwinex trading hours for the upcoming U.S. Labour Day on September 3rd, 2018. All times are in UK (BST) time.    Instrument Trading Hours on September 3rd 2018  COMMODITIES   Gold 23:01 Sun – 17:59 Mon Silver 23:00 Sun – 18:00 Mon Platinum 23:00 Sun – 18:00 Mon Palladium 23:00 Sun – 18:00 Mon US […]

Please note the amended Darwinex trading hours for the upcoming U.S. Labour Day on September 3rd, 2018. All times are in UK (BST) time.

 


 Instrument Trading Hours on September 3rd 2018
 COMMODITIES  
Gold 23:01 Sun – 17:59 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
Natural Gas 23:00 Sun – 17:45 Mon
 INDICES  
Japan 225 23:00 Sun – 18:00 Mon 
 US SPX 500 23:00 Sun – 18:00 Mon
 US Tech 100 23:00 Sun – 18:00 Mon
Wall Street 30 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!

UK100 index CFD will be closed on Monday 27th August

20 August 2018

Please note that the UK100 index CFD will be closed on Monday 27th August due to UK Summer Bank Holiday. All other assets will trade according to the usual trading hours. 

Please note that the UK100 index CFD will be closed on Monday 27th August due to UK Summer Bank Holiday. All other assets will trade according to the usual trading hours. 

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ESMA leverage on DEMO trading accounts as of July 26th

18 July 2018

New ESMA rules are around the corner and we want you to be prepared. Between July 24th and 25th, we’ll start modifying leverage conditions of assets on demo trading accounts. This way, as of July 26th, you’ll be able to check out how new ESMA conditions affect your demo accounts and be prepared for the […]

New ESMA rules are around the corner and we want you to be prepared.

Between July 24th and 25th, we’ll start modifying leverage conditions of assets on demo trading accounts. This way, as of July 26th, you’ll be able to check out how new ESMA conditions affect your demo accounts and be prepared for the leverage transition on real accounts.

Note that this only affects demo trading accounts. Transition to ESMA leverage restrictions on real trading accounts will follow the announced roadmap.

Darwinex Amended Trading Hours (US Independence Day)

27 June 2018

Please note the amended Darwinex trading hours for the upcoming US Independence Day holiday on 3 & 4 July 2018 (all times are in UK time).  Instrument 3 July 2018 (Tue) 4 July 2018 (Wed)  FX 22:05 Mon – 22:00 Tue 22:05 Tue – 22:00 Wed   DARWINS 22:05 Mon – 22:00 Tue 22:05 Tue – 22:00 Wed […]

Please note the amended Darwinex trading hours for the upcoming US Independence Day holiday on 3 & 4 July 2018 (all times are in UK time).

 Instrument 3 July 2018 (Tue) 4 July 2018 (Wed)
 FX 22:05 Mon – 22:00 Tue 22:05 Tue – 22:00 Wed
  DARWINS 22:05 Mon – 22:00 Tue 22:05 Tue – 22:00 Wed
 COMMODITIES    
Gold* 23:01 Mon – 21:59 Tue 23:01 Tue – 18:00 Wed
Silver* 23:00 Mon – 22:00 Tue 23:00 Tue – 18:00 Wed
Platinum* 23:00 Mon – 22:00 Tue 23:00 Tue – 18:00 Wed
Palladium* 23:00 Mon – 22:00 Tue 23:00 Tue – 18:00 Wed
US Crude* 23:00 Mon – 22:00 Tue 23:00 Tue – 17:45 Wed
Natural Gas* 23:00 Mon – 22:00 Tue 23:00 Tue – 17:45 Wed
 INDICES    
Australia 200 23:00 Mon – 22:00 Tue 23:00 Tue – 22:00 Wed
 Europe 50 23:00 Mon – 22:00 Tue 23:00 Tue – 22:00 Wed
France 40 23:00 Mon – 22:00 Tue 23:00 Tue – 22:00 Wed
Germany 30 07:00 – 21:00 07:00 – 21:00
Spain 35 07:00 – 19:00 07:00 – 19:00
Japan 225* 23:00 Mon – 18:15  Tue 23:00 Tue – 18:00 Wed
 UK 100 23:00 Mon – 22:00  Tue 23:00 Tue – 22:00 Wed
 US SPX 500* 23:00 Mon – 18:15 Tue 23:00 Tue – 18:00 Wed
 US Tech 100* 23:00 Mon – 18:15 Tue 23:00 Tue – 18:00 Wed
Wall Street 30* 23:00 Mon – 18:15 Tue 23:00 Tue – 18:00 Wed
 CRYPTO    
All Crypto Instruments  22:05 Mon – 22:00 Tue 22:05 Tue – 22:00 Wed
*Amended Darwinex trading hours.

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

Turkey General Elections on June 24th, 2018

21 June 2018

On Sunday June 24th, 2018, the first  round of general elections will be held in Turkey. If you plan to stay in the market during the weekend in pairs related to the Turkish lira (USDTRY, EURTRY y GPBTRY), please make sure you post margin / equity in your account as volatility is expected to increase […]

On Sunday June 24th, 2018, the first  round of general elections will be held in Turkey.

If you plan to stay in the market during the weekend in pairs related to the Turkish lira (USDTRY, EURTRY y GPBTRY), please make sure you post margin / equity in your account as volatility is expected to increase heading into the elections and upon Sunday’s market open. Although we are not planning to introduce changes to our margin requirements, please be informed that Darwinex reserves the right to change margin requirements as we move closer to the elections and depending on the outcome.

Should we decide to introduce any changes to our trading conditions, we’ll  contact you via email, blog post and social media as soon as possible.

Please do not hesitate to contact us at info@darwinex.com should you need assistance.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69 % 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.