For more than eight years, our Seed Capital Programme, DarwinIA, has positively impacted the trading of thousands of traders by seeding their strategies and helping them reach the next level. But as with any product, evolution and innovation is key. That’s why, in September 2023 (or October at the latest) DarwinIA will evolve to become a more accessible and progressive programme for everyone.
Before diving into the updates, we’ll take a look back for you to understand the reasons behind these changes.
A bit of history
We know that profitable traders exist, and our purpose is to help them scale their income sustainably. This has been the driving idea behind Darwinex from the beginning and has shaped our decisions over the past 11 years – from our philosophy to the design of our product and our business model. Being an asset manager allows us to provide access to capital to our clients and monetize through this route, not only through intermediation.
When we opened our platform to investors in 2014, we realized that we didn’t have sufficiently established track records that investors could trust. That’s how DarwinIA was born: a programme designed to motivate and incentivize the best track records, with the hope of attracting more trading talent and, consequently, more external investors to the platform.
However, over time, DarwinIA has lost its appeal for the top traders, as there are now cases of DARWINs with millions of real investment under management.
A more accessible and progressive programme
The transformation of DarwinIA into a more appealing programme for traders who don’t have yet consolidated track records is, therefore, a necessary evolution. It will be a programme that accommodates all traders, regardless of their years of experience in the market.
The long-term goal remains the same: we want our traders to become successful and attract third-party capital at scale. In the short term, we want the path to that goal to be much more motivating by adding incentives that encourage further growth. Otherwise, we fear that many traders will give up or resort to leverage or other less recommended paths.
DarwinIA will become a two-level programme that rewards traders from the beginning and as they build their track record. The first level will be called DarwinIA SILVER, and the second will be DarwinIA GOLD.
You may already be familiar with these two levels of DarwinIA as they are currently available in Darwinex Zero, but don’t worry if you’re not! Keep reading as we explain everything you need to know about the upcoming changes and what they will mean for you.
The first level of the programme: DarwinIA SILVER
DarwinIA SILVER has been created so that traders have a chance to receive an allocation in their very first participation. Therefore, only the last 6 months of trading activity are taken into account as a maximum. The purpose of the SILVER level is for traders to seek improvement in their track records over 6-month periods, aiming to progress towards winning track records.
This will be the biggest advantage for clients in comparison with the current DarwinIA where traders have to hold a much longer track record to enter the programme and vie for an allocation.
To receive a seed capital allocation in DarwinIA SILVER, the DARWINs will have to meet a minimum required rating. This rating will consider:
- The return of the current month.
- The cumulative return of the previous five months.
- The maximum drawdown during the last six months.
This new approach to defining the DARWINs that will receive an allocation emphasizes the importance of maintaining a consistently good track record over time, rather than penalizing traders for a single bad month. Furthermore, we think it’s important to incentivise traders earlier on in their journey and this new calculation will do exactly that.
Pro tip: You can play with different return and drawdown inputs in our rating calculator to see a provisional rating and allocation estimate.
Capital Allocations in DarwinIA SILVER
Allocations in DarwinIA SILVER will be maintained for three consecutive months. If your DARWIN reaches the minimum rating, you’ll receive the minimum allocation of €25,000. However, if your rating beats the minimum rating and also beats the other traders, you’ll receive up to €350,000 for your strategy. Please note that DarwinIA allocations may increase as the participants increase. Look at the allocations on our website for the most updated information.
A guaranteed allocation if you meet the minimum rating means that the number of allocated DARWINs will not be capped, the number of DARWINs getting an allocation will be determined every month according to the number of traders reaching the minimum rating.
In the current version of DarwinIA, you’ll know that allocations are reduced proportionally if you don’t maintain a certain minimum equity in your account. With DarwinIA SILVER, you’ll be glad to hear that this reduction in the allocations will not be used. This will mean that many more traders benefit from full allocations instead of reduced ones. The only account equity restriction now is the much simpler rule we’ll discuss next, which requires you to maintain a minimum of $1,000 in equity in your live trading account throughout the month to participate. In other words, if the equity of your account drops below 1,000 dollars at any point during the month, your DARWIN will be excluded from the corresponding month’s edition.
Requirements to participate in DarwinIA SILVER
- You’ll need to have a live account with a minimum of 1,000 dollars in equity during the whole month.
- Correlation during the last three months of less than 0.85 with any other DARWIN (or less than 0.5 with another DARWIN from the same provider).
- Having the DARWIN open to investors, with a divergence no worse than -0.4%.
In summary, the new DarwinIA SILVER will provide:
- Faster allocations (a reduced return/risk measurement time frame).
- Guaranteed allocations for all qualifying traders meeting the minimum required rating – no matter how many there are.
- Simpler participation requirements.
- Allocations will no longer be reduced based on account equity (providing you keep $1,000 in your account).
It is also important to note that, in the current DarwinIA, with $1,000 of equity at risk, you could receive an allocation of €13,000 by ranking last, and up to €36,000 if you were to rank first. With the same equity in the new DarwinIA SILVER, these figures increase to €25,000 and €350,000 respectively! In other words, with the minimum equity, in DarwinIA SILVER, allocations are between 2 to 10 times higher than before.
Below, you can see a comparison table between what allocation you would receive for a given equity in DarwinIA currently, and what you would receive with the minimum $1,000 of equity in the new DarwinIA SILVER:
The second level of the programme: DarwinIA GOLD
When you reach 8 months of track record with consistent performance, that’s when we start considering you as a promising trader to present to real investors.
Unlike the SILVER level, to receive an allocation in DarwinIA GOLD, we’ll only consider the return during the current month. You’ll participate for allocations among the top traders on the platform, so the important factor will be to see who outperforms the market month after month.
Capital Allocations in DarwinIA GOLD
The allocations in DarwinIA GOLD will be higher than the ones in DarwinIA SILVER, as high as €500,000 a month. But that’s not all. You’ll also receive each and every allocation for twice as long as in the SILVER tier, so six months instead of three. This gives you a greater opportunity to recover from any initial drawdown and benefit from the all-important 15% performance fees paid on the profits you generate on the allocation.
As we mentioned before, in the current DarwinIA, allocations get reduced if you don’t maintain certain levels of equity in your account. In the new DarwinIA GOLD, however, as long as you maintain $1,000 in equity in your account throughout the month, you will participate and receive the ‘full’ allocation just like you do in the SILVER tier.
Requirements to progress to DarwinIA GOLD
- You’ll need a track record of a minimum of 8 months
- And meet one of the following parameters:
As you can see, you’ll need a track record with a minimum qualifying duration and you’ll also need to exceed a number of “performance-based” thresholds that change slightly depending on the length of your track record. Please note that the participation requirements mentioned earlier for the SILVER tier (account equity, correlation with other DARWINs and divergence), also apply for the GOLD tier.
Pro tip: if you feel you already have a robust trading strategy and want to measure it with the top traders at Darwinex quicker, you can directly contact us and we’ll personally evaluate your particular case.
Darwinex & Darwinex Zero
At present, Darwinex traders and Darwinex Zero subscribers participate in separate versions of DarwinIA. However, both types of traders need to execute their trading skills and good risk management habits in ‘exactly’ the same way, in order to be allocated seed capital. The fact that one community uses a virtual money account and the other uses a full live brokerage account doesn’t change the way they need to deploy their trading skills to attract capital. The long-term vision is a common denominator to stay at the top on both platforms.
The two DarwinIA Seed Capital Allocation programmes will come together so traders in both platforms will have equal opportunities to achieve seed capital and make their journey into asset management more gradual, fair, and rewarding. Effectively bringing together the two Darwinex trading communities means that they can participate together and pit their skills against each other to get those seed capital allocations.
So, in the future, you’ll see DARWINs with the regular 3-character ticker symbols and also DARWINs from Darwinex Zero with 4-character ticker symbols.
As Darwinex and Darwinex Zero customers participate together, we look forward to allocating capital to more traders than ever before!
Migrated track records from other brokers
We’ll also define a new treatment for migrated track records for DarwinIA SILVER and DarwinIA GOLD. The measure is not retroactive, meaning it will only apply to DARWINs that have been approved from the implementation onwards and are migrated.
In the SILVER level:
The rating in DarwinIA SILVER will be calculated based on the returns obtained by the DARWIN from the migration date to Darwinex, i.e., from the first trade executed in our account. The only advantage compared to a DARWIN that has always operated in our ecosystem is that the creation of the DARWIN will be more immediate because we can calibrate the risk engine with the track record accrued in another broker.
In the GOLD level:
To determine if a DARWIN can access DarwinIA GOLD, we will consider the migrated track record, but it will be done after a rigorous evaluation of the DARWINs that meet the requirements to participate in the GOLD level or are close to achieving them.
The evaluation will take into account:
- The trust generated by the broker from which the migration is made.
- The guarantees provided by the trader that the strategy is their own.
- That the strategy is replicable under our execution conditions.
The evaluation may include the obligation to trade for at least a certain number of months from our accounts in cases where there are doubts. We can also revoke the decision to use an old track record if we consider that there is evidence that the track record does not meet the migration criteria.
Migrations from Darwinex Zero are excluded from this treatment since, for all purposes, we consider the generated track record as if it were from Darwinex.
High Water Mark treatment for DarwinIA allocations
Back in June, we mentioned that the High Water Mark (HWM) treatment for DarwinIA Allocations will be updated to further benefit our traders! When a trader has no open allocations in DarwinIA, fictitious profits will be introduced into their history so that the HWM matches the cumulative profit to origin. This way, in any new allocation the client receives in the future, they will start earning performance fees without having to recover any accumulated losses up to that point.
To read a full explanation of this topic, please read here our previous blog article.
Finally, we want to stress that all these product improvements are the consequence of closely monitoring our traders’ needs and concerns in order to find ways to better accelerate our traders’ talent. Our mission has always been, and remains, to make a product that leverages the success of our clients beyond what they could ever imagine.
Remember, the new DarwinIA SILVER and DarwinIA GOLD are expected in September 2023, but may need to be pushed back to October. So please, keep an eye on Darwinex Social Media for the latest updates on that date.
We hope you are as excited for these changes as we are!
Like always, please write to us at firstname.lastname@example.org if you have any comments or questions about this update.
Your Darwinex Team.