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DarwinexLabs Latest Release: DARWIN $DWF

In this post, we present the Darwinex Laboratory’s (DarwinexLabs) latest accomplishment: DARWIN $DWF

One of the aims of this engineering effort, is to generate additional Darwinian Dividends to award via DarwinIA to the month’s best traders.

In keeping with its motto, Darwinex Labs continues its search for community-driven alpha, harvesting value from the Darwinex Trader Collective to create investable trading strategies FOR the collective.

So without further ado, let’s put the petri dishes, microtiter plates, microscopes, centrifuges, and test tubes to one side, and dive straight in 🙂


Presenting The New Community DARWIN: $DWF

Note: This DARWIN has a limited live track record – please exercise caution.

Before we elaborate more on $DWF, we encourage the DARWIN Investor community to please exercise caution.

This is because in engineering the concept of DARWIN $DWF, only data since the beginning of 2015 has been utilized.

The listed DARWIN itself has a live track record since January, 2018.

Despite its short time in live existence and the caution we’ve encouraged you to exercise, we’ve decided to list $DWF on the DARWIN Exchange because of the fundamental strength of the logic behind it.


$DWF vs $DWC: Long-term Returns vs Hedging

Just like its active predecessor – $DWC – DARWIN $DWF takes trading decisions based on the exposure of the Darwinex Trader Collective in Forex.


Important Note: To be clear, Darwinex NEVER acts as a counterparty with the DARWINs from DarwinexLabs. They are investable assets listed on the Exchange, like any other DARWIN.


Instead of being a hedging asset like $DWC, DARWIN $DWF aims to achieve long-term positive returns.

The algorithm has been designed such that $DWF adapts to temporal increases in data available to Darwinex.

Any and all improvements to the algorithm will be implemented gradually over time, as more data becomes available.


DWF vs. DWC: + CLOSE STRATEGY (Cs) + PERFORMANCE (PF) – CAPACITY (Cp) – LOSS AVERSION (La)

The DARWIN DWF owes its existence to DWC because they share the same DNA or genetic code.

However, in the laboratory, we have gone ahead to make some changes to improve the Close Strategy (Cs) of DWC, which currently has a score lower than 5.

Both the Close Strategy (Cs), as well as the Performance (Pf), prove to yield promising results in the backtest, at the cost of reducing the scores for Capacity (Cp) and Loss Aversion (La).


DWF vs DWC CORRELATION

Since the logic of both DARWINs is similar, the correlation between them is likely to be high.

We hope that $DWF has an upwards bias, unlike $DWC which behaves like a hedging asset.


Where can you find it?

All the Community DARWINs reside in the ‘’Community DARWINs’’ filter.


What are your thoughts regarding $DWF?


Related articles

Introducing Darwinian Dividiends

Introducing Darwinian Dividends

Darwinian Dividends

The DARWIN Exchange will soon pay Darwinian Dividends (April 2018) in addition to success fees on the current DarwinIA notional capital allocation.

 

Sign up to earn darwinian dividend

Exchange members are aligned to make the most return on capital using everyone’s data. This facilitates a collective Darwinian Dividend

 
If you’re wondering:
  • Why add Darwinian Dividends?
  • Where do the dividends come from?
  • How is the amount determined?
Read on for all the answers!
 
We hope you’re as excited about this development as we are! It’s a merit-driven icing on the proverbial “DarwinIA cake” if you will.

Collective data -> Darwinian Dividends

The dividend source is Community DARWINS, e.g. $DWC, DarwinexLabs‘ first, tradable community sentiment indicator, and recently followed by its sibling, $DWF.
 
Both let investors trade real-time community loss aversion. In particular, their “performance fees” sections suggest users trade it for both pleasure and profit.

Feeling left out?

A Community DARWIN is like every other DARWIN in that:
  • It competes for investor capital with other signals.
  • Investors replicate trades while not knowing trade specifics in order to protect trader intellectual property (IP)
  • Investors pay the standard 20% performance fee
It differs from all other DARWINs, in benefiting from private information that belongs:
  • Not to the Exchange
  • Not to any one Exchange member
  • But to every Exchange member
For this reason, Darwinex will pay out all the performance fees you see on a Community DARWIN’s performance fees profile section, as Darwinian Dividends.

Community data -> just $DWC & $DWF?

In the long run, Darwinex aims to share all raw community signals, not just towards existing Community DARWINs.

Before that, however..

It needs signal wrapping/encryption technology.

Barring that, publishing the raw data would gift free-riding signal users more than 80% profit share, as it would be possible for them to trade on the signal outside Darwinex, at the expense of the Darwinex community

Alas, encrypting everyone’s real-time signal to secure 20% success fee is a tough technical cookie.

Until we crack it, DarwinexLabs will act as the community data’s caretaker.

In this regard, $DWC and $DWF are the result of transforming raw community loss aversion data into tradable assets.

Rest assured that DarwinexLabs is hard at work investigating further siblings… but for now, you know why DarwinIA “just” pays dividends on $DWC and $DWF.

On to the distribution key.

Distribution key -> meritocracy

Darwinex hopes you agree that:
  • Member community data is valuable
  • 20% performance fee is the fair price for it
  • Dividends belong to Darwinex members
But, what is the best way to structure dividend payouts resulting from community signals?
  • Pro-rata payment: every trader receives an equal pay-out?
  • Skewed payment: according to some meritocratic criteria?

Our take: meritocracy!

Darwinex will pay dividends (=cash prizes) to the best providers, because it’s a win-win for traders, investors and Darwinex:
  • The better the traders supplying individual DARWINs..
  • The bigger the incentive for new traders and investors to join.
  • The more statistically significant the collective signal available to all..
  • The bigger:

          – the 80% kept by demand (=investors) for individual and collective signals.

          – the 20% earned by signal suppliers (=DARWIN Providers)


Payout format

Dividend payouts will be skewed to maximise incentive from every pennie of performance fee paid by data users.
As such, dividends will be paid:
  • To the top 10 DarwinIA participants in a given month should $DWC had accumulated 10K in performance fees paid, if not it will be paid in multiples of 1000  starting from the winner downwards
  • In T+1 monthly cycles, meaning that the winners in month X will share the performance fees accumulated up until the end of such month
For illustration purposes, assume 3 success-fee scenarios for total success fees collected by $DWC and/or $DWF in a given month:
  • Performance fees paid 5500  : Top 5 DarwinIA winners will receive 1000  each, with 500  rolled over to the following months payout
  •  Performance fees paid 12.500 : Top 10 DarwinIA winners will receive 1000  each, with 2500  rolled over to the following months payout
  •  Performance fees paid 1.500 : The DarwinIA will receive 1000 , with 500  rolled over to the following months payout

The initial payout in April 2018 will:

  • Be paid to the top 10 participants in DarwinIA rankings in March 2018 if performance fees reaches 10000
  • Be based on cumulative performance fees earned by DWC through end March 2018
  • Per subsequent payouts, be capped at EUR 10k, with excess performance fees generated rolled over to the following months payout

What’s your take?

What are your thoughts? Do you:

 We look forward to your thoughts!

 


Want to know more about $DWC?

Here’s an insightful webinar about $DWC hosted by Juan Colón where he explains the rationale, for Darwinex and DARWIN investors, of backing the $DWC community sentiment indicator:

You can leave your comments here, in our YouTube Channel or writing at info@darwinex.com.

Almost forgot to say! Please, do not hesitate to share this content with your fellow traders & investors by using the icons you see on the left hand side of this post 😉