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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

Darwinex Trading Hours for ANZAC Day

19 April 2018

Please note the amended Darwinex trading hours for the upcoming ANZAC Day on 25 April 2018 (all times are in UK time).  Instrument Trading Hours  FX 22:01 Wed – 22:00 Thu   DARWINS 22:01 Wed – 22:00 Thu  COMMODITIES   Gold 23:01 Wed – 21:59 Thu Silver 23:00 Wed – 22:00 Thu Platinum 23:00 Wed – 22:00 Thu Palladium […]

Please note the amended Darwinex trading hours for the upcoming ANZAC Day on 25 April 2018 (all times are in UK time).

 Instrument Trading Hours
 FX 22:01 Wed – 22:00 Thu
  DARWINS 22:01 Wed – 22:00 Thu
 COMMODITIES  
Gold 23:01 Wed – 21:59 Thu
Silver 23:00 Wed – 22:00 Thu
Platinum 23:00 Wed – 22:00 Thu
Palladium 23:00 Wed – 22:00 Thu
US Crude 23:00 Wed – 22:00 Thu
Natural Gas 23:00 Wed – 22:00 Thu
 INDICES  
Australia 200* 08:10 – 22:00
 Europe 50 23:00 Wed – 22:00 Thu
France 40 23:00 Wed – 22:00 Thu
Germany 30 07:00 – 21:00
Spain 35 07:00 – 19:00
Japan 225 23:00 Wed – 22:00 Thu
 UK 100 23:00 Wed – 22:00 Thu
 US SPX 500 23:00 Wed – 22:00 Thu
 US Tech 100 23:00 Wed – 22:00 Thu
Wall Street 30 23:00 Wed – 22:00 Thu
*Amended Darwinex trading hours.

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

Change in bank account details for GBP deposits

6 April 2018

Over the next few days the segregated accounts for our GBP clients will be transferred over to a new FCA regulated banking entity. Your deposits remain protected under the Financial Services Compensation Scheme (FSCS). The change will be 100% automatic and will not require any action on your part. Nevertheless, due to the fact that […]

Over the next few days the segregated accounts for our GBP clients will be transferred over to a new FCA regulated banking entity. Your deposits remain protected under the Financial Services Compensation Scheme (FSCS). The change will be 100% automatic and will not require any action on your part.

Nevertheless, due to the fact that the bank account details used up until now for GBP deposits have been changed, if you wish to make a deposit via bank transfer, make sure to initiate the deposit from your Wallet in order to receive the new bank account details per email. This should be the way you always initiate a deposit as opposed to copying a previous deposit’s data.

We remain at your disposal at info@darwinex.com

And the DarwinIA winners are… (March 2018)

2 April 2018

The March 2018 edition of our DarwinIA trading challenge came to its end. Below you can find the 48 winners of our € 4,000,000.00 notional allocations for a 6 month period and the 7 traders who won € 1,000 in Darwinian Dividends. Congratulations to the winners! Place DARWIN Notional allocation Darwinian Dividends 1st VQB € 300,000.00 € 1,000.00 […]

The March 2018 edition of our DarwinIA trading challenge came to its end. Below you can find the 48 winners of our € 4,000,000.00 notional allocations for a 6 month period and the 7 traders who won € 1,000 in Darwinian Dividends. Congratulations to the winners!

Place DARWIN Notional allocation Darwinian Dividends
1st VQB € 300,000.00 € 1,000.00
2nd EEE € 250,000.00 € 1,000.00
3rd GUA € 210,000.00 € 1,000.00
4th SYO € 170,000.00 € 1,000.00
5th NCN € 150,000.00 € 1,000.00
6th BAD € 140,000.00 € 1,000.00
7th EWL € 130,000.00 € 1,000.00
8th LVS € 120,000.00 /
9th LZB € 110,000.00 /
10th CBY € 110,000.00 /
11th JHJ € 110,000.00 /
12th CLA € 100,000.00 /
13th FEG € 100,000.00 /
14th VTS € 100,000.00 /
15th VFL € 90,000.00 /
16th SDP € 90,000.00 /
17th OVL € 90,000.00 /
18th RIH € 80,000.00 /
19th STV € 80,000.00 /
20th CJN € 80,000.00 /
21st JMP € 70,000.00 /
22nd AGD € 70,000.00 /
23rd LDD € 70,000.00 /
24th CSP € 70,000.00 /
25th NAF € 60,000.00 /
26th LDZ € 60,000.00 /
27th XYF € 60,000.00 /
28th SCN € 60,000.00 /
29th PFI € 60,000.00 /
30th BGR € 60,000.00 /
31st OSM € 50,000.00 /
32nd ZLA € 50,000.00 /
33rd VRT € 50,000.00 /
34th AAN € 50,000.00 /
35th XSN € 50,000.00 /
36th ZZL € 50,000.00 /
37th ZTY € 50,000.00 /
38th SIX € 40,000.00 /
39th HTS € 40,000.00 /
40th ONE € 40,000.00 /
41st XYP € 40,000.00 /
42nd HFE € 40,000.00 /
43rd AOF € 40,000.00 /
44th MER € 40,000.00 /
45th NSC € 30,000.00 /
46th VOZ € 30,000.00 /
47th FYW € 30,000.00 /
48th QKL € 30,000.00 /

Change in bank provider

26 March 2018

Over the next few days the segregated accounts for our EUR and USD clients will be transferred over to a new banking entity. The change will be 100% automatic and will not require any action on our users part. Nevertheless, due to the fact that the bank details used up until now for EUR and […]

Over the next few days the segregated accounts for our EUR and USD clients will be transferred over to a new banking entity.

The change will be 100% automatic and will not require any action on our users part.

Nevertheless, due to the fact that the bank details used up until now for EUR and USD have been changed, any client who wishes to make a deposit via bank transfer will have to enter the new bank details.  

To access these new details, it is necessary to generate a new order to deposit via bank transfer from your Wallet.

We remain at your disposal at info@darwinex.com

Kind regards,

The Darwinex Team

Bank transfers won’t get processed on Friday 30th March and Monday 2nd April

23 March 2018

Easter is just around the corner which means a bit of vacation, reflection and celebration that we hope you enjoy with your nearest and dearest. Please note that Friday 30th March and Monday 2nd April are UK Bank Holidays. Bank transfers to / from your Darwinex Wallet won’t get processed on those days. Should you […]

Easter is just around the corner which means a bit of vacation, reflection and celebration that we hope you enjoy with your nearest and dearest.

Please note that Friday 30th March and Monday 2nd April are UK Bank Holidays. Bank transfers to / from your Darwinex Wallet won’t get processed on those days.

Should you want to deposit or withdraw through a bank transfer next week, you might want to make arrangements to initiate the transfer process earlier.

Do not hesitate to contact us at info@darwinex.com in case you need any assistance.

Happy Easter!

 

Darwinex Trading Schedule Easter 2018

Trading Schedule for the 2018 Easter Holiday Period

Please note the amended Darwinex Trading Schedule for the 2018 Easter Holiday Period. Times are displayed in UK time and changes to regular schedules are highlighted in red.   Instrument Thursday 29th March  Friday 30th March  Monday 2nd April FX 22:01:01 Wed – 21:59:59 Thu 22:01:01 Thu – 21:55:00 Fri 22:05 Sun – 21:59:59 Mon Commodities* 23:00 […]

Please note the amended Darwinex Trading Schedule for the 2018 Easter Holiday Period.

Times are displayed in UK time and changes to regular schedules are highlighted in red.

 

Instrument

Thursday 29th March  Friday 30th March  Monday 2nd April
FX 22:01:01 Wed – 21:59:59 Thu 22:01:01 Thu – 21:55:00 Fri 22:05 Sun – 21:59:59 Mon
Commodities* 23:00 Wed – 22:00 Thu CLOSED  23:00 Sun – 22:00 Mon 
DARWINs 22:05 Wed – 21:59 Thu CLOSED 22:05 Sun – 21:59 Mon
Indices      
Europe50 23:00 Wed – 22:00 Thu  CLOSED  CLOSED
GDAXI 07:00:00 – 21:00:00  CLOSED   CLOSED
SPX500 23:00 Wed – 22:00 Thu  CLOSED  23:00 Sun – 22:00 Mon
WS30 23:00 Wed – 22:00 Thu  CLOSED  23:00 Sun – 22:00 Mon
NDX 23:00 Wed – 22:00 Thu  CLOSED   23:00 Sun – 22:00 Mon
J225  23:00 Wed – 22:00 Thu CLOSED  23:00 Sun – 22:00 Mon
AUS200 23:00 Wed – 14:00 Thu CLOSED  CLOSED 
FCHI40  23:00 Wed – 22:00 Thu  CLOSED  CLOSED
UK100 23:00 Wed – 22:00 Thu  CLOSED   CLOSED 
SPA35 07:00 – 19:00  CLOSED   CLOSED 

 

*Please, be reminded that the instrument XAUUSD closes a minute earlier, and opens a minute later, than the rest of Commodities in Darwinex as shown in the table of Darwinex assets and spreads.

March 30th

In spite of the DARWIN Exchange being closed on Friday, 30th of March, the quote in the majority of DARWINs will keep moving throughout the whole market day due to the fact the the Forex market will remain open as seen in the table above.

March 29th and April 2nd

On the other hand, on March 29th -Thursday, and April 2nd -Monday-, the DARWIN Exchange will remain open even if the underlying assets’ market is closed, like AUS200 on March 29th or UK100 on April 2nd.

Should you want to know the standard procedure when you buy/sell a DARWIN whose underlying asset market is closed, we recommend you to read the following Knowledge Base article: Can I buy and sell DARWINs whenever I want?

Do not hesitate to contact us at info@darwinex.com for support.

Happy Easter!