Fellow trader SKForex is a long time acquaintance on our platform. Since he migrated his strategy over to Darwinex in January 2016, he has managed to win various DarwinIA awards with his DARWIN $UYZ. We encourage you to read this interesting interview with the creator of the DARWIN which currently features in the ‘On Fire’, ‘Good Scores’, ‘Return > 50%’ and ‘Trending’ filters, what a beast!
Tell us a little about yourself. How did you catch the bug for trading and how long have you been trading for?
I am currently 26 years old, but I started to take a serious interest in trading towards the end of 2011. At that time I was studying for a physics degree, and one day while I was taking a long at the news on the computer I came across an advert for the stock market. I clicked on the advert and from that day forwards I just knew that this was for me. The truth is that since I was little I have had an interest in the stock exchange, I used to jot down in a notebook the quote prices for the main stock markets and currency pairs that appear on the teletext. I then put trading to one side to focus more on physics until the situation became more favourable.
The first few months were taken up by searching for information. I made sure that it was not a scam by reading all the small print and checking the broker’s certification, whilst at the same time spending many hours a day watching videos and reading anything I could get my hands on about trading. After spending two months in demo, losing and then sometimes winning, I decided to invest my first capital in the Christmas of 2012. The first trade I made was very profitable, I gained a return of 33% from a bearish breakout on the EURUSD. That makes you feel like you could easily become a millionaire, or at least that there is a possibility; the following trades brought me back to reality.
And so it was, that after the first trade I lost everything on the account over the following months, and I repeated the cycle once more until I realised that my risk management was letting me down a lot. I decided to start working and saving up to be able to start again, and so then I returned. When I returned, my objective changed from earning a lot of money, to simply losing a little, or not losing, and I remained like this for almost a year, fulfilling my objective.
Following on from this, the CFDs competition boom arrived, and I signed up for all of the competitions which I could find, seeing as I didn’t have much capital my main goal was to make money from them. So in the summer of 2013 I won my first free competition and after that I had the best year of trading in my life, achieving a profit of 1700% from the money I got from the second competition (I was conscious that I was taking on a lot of risk, but as Kostolany says, ‘who has no money, has to speculate’). At the same time, I won awards in a further 6 or 7 competitions leading up to 2015, when I took part in my last competition (mainly because I was not allowed to participate in the competitions when I won the most). I ought to clear up that after having won the competitions, you had to generate three times the prize awarded in commissions within a certain time period. This is why the DARWIN $UYZ started off very actively, but with so much risk and such little correlation with the underlying strategy.
From the outset, this has been a period of trying to improve and focus completely on consistency; constantly improving on weaknesses whilst maintaining strengths – a process which is very long winded. At the moment I live off of trading, and while it goes well for me I will continue to do so. Therefore the investor should be very patient; you do not always win, losing is a part of the job.
In regards to your strategy, what assets/pairs do you usually trade on? In what time frame do you like to trade?
I mainly tend to trade on the 6 majors: USDCAD, AUDUSD, NZDUSD, EURUSD, GBPUSD and USDJPY; as well as occasionally gold, some cross pairs, or indices, if I like what I see.
I must say that my strategy is entirely discretionary; I do not use indicators, except for a few averages and the odd MACD to decorate my work screen and to not lose track of the current market situation. I trade on anything that according to my judgement has the potential for an imminent movement, sometimes I make a mistake – often due to bias or error, and I get it right by a slight majority of the time. In fact, I believe that my current advantage lies in my strange way of trading, because my trading is completely intuitive and based on the experiences which I have gained through hours of market observation. By the means of price action and a clear context of the situation, it is possible to have a certain probabilistic advantage. You have to bear in mind that the majority of traders trade in a very mechanical or algorithmic way, with high frequency trading competing with market makers, arbitration, etc. whereby so many competitors leave few niches to be exploited in the market, this has to reinvent itself.
The time frames which I like are of 1 hour and of 4 hours, and occasionally I increase or decrease the time frame. Nevertheless, to get a feel for the context I increase the time frame and then I decrease it again to where I want to trade.
As a trader, what would you say is your main strength?
For me, my main strength has been the natural capacity to overcome very tough situations of Drawdown which often heavily affects other traders. In this regard, I recognise, without realising it, that I detect when I have done something bad, I reset for a time, and then I relapse again thinking that this is merely a statistic of how I trade. There are traders who, after entering into drawdown and not wanting to make the situation worse, change how they trade, whether that be by reducing their risk, or changing something and focusing on recovering their losses or not making the situation worse; when what you really have to do is precisely the opposite. This is why many traders prefer to automate their strategies (they remove the psychological element). The problem with this is your lose the discretion, which gives you a good advantage if you handle it well.
I would say that my other strength is my ability to read the graph. Sometimes I surprise myself because by simply seeing a graph for a few seconds I can see what is most likely to happen, to such a point that it wouldn’t be the first time that I have dreamt about what the market would do, and that is exactly what has taken place the following day, regardless of whether that has been good or bad for the trade which I had open. I know that it is difficult to disconnect, and this is proof of that.
For the time being those two strengths (overcoming obstacles or errors, and getting right the majority of my predictions) have compensated positively for my weaknesses. Let’s hope it carries on like this, and in fact, I am hopeful because the algorithmic systems end up losing their advantage, whereas someone who develops their own strategies depends upon themself to continue along the right path.
And your biggest weakness?
My biggest weakness is a little bit of everything. A discretionary trader is affected by psychology, no matter how much they have it under control. My best streaks have been accompanied by great concentration and emotional control, and the contrary has coincided with my worst streaks; if everything were always stable, and I were always concentrating, perhaps I would barely lose anything, but that is very difficult. Another weakness is managing risk adequately, due to the fact that in my trading strategy no two trades are the same – each trade is completely different and each one has to be handled differently (which is why I have low scores in Return and Duration Consistency). This leads me to take different risks according to the strength of each trade, and although the majority of the times I get it right, there is always some trap in the market which I can fall into. Right now, I am working on minimising this impact and it is going well for me.
The good thing about trading is that there is an infinite number of combinations; being a good trader consists of finding the best combination that brings out the best in you, and getting rid of or minimising those weaknesses that previously stopped you from progressing. Therefore, this business in unique; today you trade differently to yesterday, but also differently to tomorrow.
According to our algorithms, your strategy stands out especially for your Performance. Is there any advice you could give to other users to improve their score in these attributes?
Do not trade based on the attributes. Let me explain myself, everybody has their strategy and their idiosyncrasies which the attributes measure in a standardised way, but if something works the way that you like there is no need to risk your advantage in order to improve specific scores. I, for example, have bad scores in consistency and open timing; at one point I tried to improve them, and I did improve them, but my results worsened. What I did was accept that I have poor open timing but good closing timing, and that the consistency has nothing to do with whether a strategy wins or not. By way of example, I have seen very mechanical algorithmic strategies with high consistency that didn’t win, and strategies with poor consistency scores that do win, and win a lot. The market has nonlinear processes, therefore it is illogical in itself to treat two different situations as the same.
For this reason, my advice is to make the most of the advantage that you have found in the way that works best for you, and if then you find defects, try to improve them. The good scores will come, even if they are not as high as other strategies. That said, there are some attributes which I consider important and can help a lot to improve, such as risk stability, loss aversion and risk adjustment.
There is one aspect which isn’t an attribute, but that is almost as important as the rest, is the divergence between the DARWIN and the investor that replicates it. Improving or maintaining the divergence between certain values is key to making your strategy climb up the ranks. To improve your divergence, I advise using types of limit orders, and when you go to market do so in moments of maximum liquidity and low slippage; it has always helped me to ensure that my investors have a positive divergence (so they ended up winning more than me haha).
What would you say is the most important lesson that you have learnt in the world of trading?
The worst and the best is yet to come! This expression sums up perfectly, in my point of view, what the market and trading profession is. It makes you be prepared and not drop your guard, and additionally it provides you with the strength necessary to get up another day and go for the good that is yet to come. That philosophy will keep me on the strait and narrow for as long as I respect it. Everything that has been done up to now isn’t even a tenth of my objectives for the long term, therefore, as it is logical, many good and bad things are yet to come.
The world of trading has taught me to be a better person in all aspects where I was lacking. If I look back to my beginnings and compare myself to how I am today I would not recognise myself in terms of how I deal with things. I can certify, without any doubt, that those who dedicate their time to trading will not deal with their day-to-day life in the same way as they did before. You learn to be extremely rational and honest with yourself in situation where you would never have been before.
Lastly, do you have any comments which you would like to add for other traders or investor who are reading this?
I would add a piece of advice for both groups. To the traders, I would say that the important thing would to be constant and consistent, because that is what is rewarded the most, above all in Darwinex. To the investors, I would say that once they have decided to invest in the chosen DARWINs, they need to be very patient, the fruits will be seen year by year after a slow process. By way of example I will present you with two types of investor. One has invested in my DARWIN from the moment that I listed it up until today, and together with me he has made a good return over the past year and a bit. On the other hand, there is an investor with a lot of capital that has bought and sold my DARWIN a number of times, but is currently making a loss. This is down the psychology of the investor, which peaks when their equity has risen, and makes a loss when they face their first drawdown. The conclusion I have reached is that the patient investor saves a lot of time and money, whilst the active investor is at the mercy of any noise and their own psychology.
Finally, I would like to add that I have another DARWIN which I will list when when I reach an experience score of 10 (it is currently 5), and will have a very similar base to $UYZ, but trading on a wider range of opportunities to diversify risk. For the time being it is going well, so we will see if it carries on this way. I also want to add that my main DARWIN has a low capital (currently 2000), which does put off investors, because when I started with Darwinex over a year and a half ago with 600 euros, I decided that it would be my advantage that funds the account not my own deposits. I will list the DARWIN in the next few months, and it will have an equity of over 10000, and it will provide those investor put off when the see an equity of 2000 with more confidence.