Evolution of Trader Performance in the Darwinex Community

1 July 2019
Javier Colón

Five years on from launching the broker, we share with the public one of the key metrics at Darwinex. Here’s our trader community’s return month on month since Darwinex was born.

Our vision is to speed up the trader’s evolution. From when they pay for the brokerage to when they get paid for managing investor capital. If Darwinex were to make money out of going against our mission, we would not feel rewarded. With the ups and downs that come with a business like ours, we would have sold the company a long time ago. We didn’t because we have always been very conscious of the value we give to the world of retail trading.

We are proud of being a positive influence on our clients. The effort of the Darwinex community (shareholders, employees and clients) is beginning to bear fruit.


Improving year on year

In the following table we show the trader community’s return month on month since Darwinex was born. We calculate the value

  • supposing that all the trader funds are in one trader account and
  • taking into account
    • the monthly deposits and withdrawals of said account,
    • the profit and loss generated in the same period, as well as
    • commissions and swaps.

Ruling out the year 2014, because we had very few clients, our community’s return has improved year on year.

rendimiento

Despite improving, the traders as a whole are still losing. We are conscious how utopian it is to aspire to retail clients winning on aggregate. Nonetheless, we encourage other Forex/CFDs brokers to publish these results. We are sure they would be much worse results than ours.

We know that these numbers are difficult to accept for traders who are starting out. But if they want to have any chance of winning in the market it’s better they know the reality. This activity is not as easy as many smokesellers make it out to be. But it’s not as complicated as people who never managed to make any money claim either. It is possible, but as with everything in life, it requires dedication and passion.


Pre-ESMA and post-ESMA period

ESMA’s intervention in August 2018 has been beneficial for the average trader. Reducing the leverage has brought about results.

  • There has been a drop in the rotation (the volume of all the orders opened by the trader in monetary value, divided by its equity) due to a drop in leverage, and
  • a tremendous improvement in the performance of traders in the last year, not justified by the drop in rotation.

(It is still too early to offer a definite conclusion on this matter. The low volatility over the past months could have played a role.)

Before ESMA, the average trader lost on average a little more than

However, now the average trader loses less than the spread. This is very relevant. And more so taking into account that the numbers don’t include thousands of euros:

If we took into account said amounts, traders as a whole at Darwinex barely would have lost money since the ESMA changes came into place.


Darwinex helps traders to improve

A large part of this improvement can be attributed to our values as a company. Our values guide each decision which could have an impact on the business and the product. Alignment between the business model / product / incentives and the vision is key to having achieved these results.

And we are speaking about facts, not marketing.

  1. We are a very competitive broker in price. Yes, commissions and spreads are the main cause of losses for clients. We keep these as low as we can without sacrificing the service and technology which set us apart.
  2. We pay continued attention to the execution quality. One pip here, another there; negative slippage here, runaway stop over there – it all adds up.
  3. We only make money from the rotation of clients. We will NEVER make a profit from our clients losing. Imposing this restriction on ourselves forces us to think of how to help our clients do better each day.
  4. We diagnose traders’ strategies live. We publish their track record whether or not they manage investor funds. This helps them to become more disciplined. As a consequence…
  5. … we give public references. At Darwinex there are traders who inspire and motivate those who are starting out. This is important at times in the learning stage in which unfortunately one loses. If somebody has achieved it, why can’t you!
  6. We prize traders on their merit, not on their personal capital, with rebates of up to 40% of the commissions. 20% of our clients enjoy these discounts.
  7. We created DarwinIA so that the largest number of traders possible opt to get paid a 20% performance fee from investor capital.
    1. Almost 25% of the DARWINs have managed to win some prize with a total of more than $2 million paid in Performance Fees.
    2. The allocations imply an extra motivation to do things the best way possible.
    3. It is the first step towards success, which up until now did not exist.
    4. It forces you to face the psychological challenge of managing third party capital.
    5. It prepares the trader for when the investment volumes increase.
  8. We offer the legal coverage to be able to manage capital through DARWINs. We put at a trader’s reach the technology to be able to create the closest thing to a fund.
    1. Leverage the trading without the need to risk the capital.
    2. Compete as an aspiring professional in the same conditions on loss aversion.
  9. We invigorate a community of traders and investors. Our clients express their opinion about our product and interact with other users. Our management is under voluntary scrutiny from our community. We do this with the aim of never deviating from the mission.

Summary

We believe in the trader and we show it on a day to day basis, without giving lip service. It is not us who says that, it’s our clients. They know us because somebody recommended us to them for no benefit of their own. And it works. In spite of a low marketing budget, users and company have grown exponentially TOGETHER since we started in 2014. (We can’t invest more in marketing because we don’t make money from the losses of our clients.)

We will continue working on improving Darwinex day by day. We are proud of our evolution together. And from here we thank you for giving us the strength to continue each day.