Loss Aversion

Trading Consistency, Intellectual property and Investor considerations

Trading consistency is another subject that is often not given the attention it deserves. Too often, traders focus on things like risk, return, and optimising parameters. Whilst these components are essential, trading in a consistent manner is important too. 

From an investors perspective, trading consistency can help to smooth the emotional rollercoaster. Traders will often want to protect their intellectual property and with good reason.

It may be easy to identify the trading strategy variables if there aren’t many of them—for instance, a time-based strategy with no filters. Investors may then be able to operate the strategy themselves, circumventing the need to pay the creator any performance fees. 

The ability to provide various levels of intellectual property protection is yet another benefit of the Darwinex platform. It allows the trader to implement privacy features preventing anyone from taking their intellectual property.

A downside of doing this is that the investor can lose valuable details about how the trading strategy operates. Investors like to know what is going on. By not having relevant information it can lead the investor to invest less than initially intended.

Another possibility is that the investor may make rash decisions whilst investing, leading to unnecessary losses. It is clear that the trader must strike a balance between informing investors and protecting their ideas. 

However, if when reviewing a traders history, the investor can see a consistent manner in the operation of trades; this can provide the investor with confidence that the trader isn’t making rash decisions.

As a trader, when designing a strategy, taking trading consistency into account can make it easier to highlight rogue trades and thus increase the robustness of your system. 

In trading, surprises are not a good thing.  

Darwinex created the Investable Attributes to measure different aspects of a trading strategy. This ability is of benefit to both traders and investors.

The Positive and Negative return consistency Investible attributes (R+/R-) offer valuable insight into the consistency of a traders trading decisions. A high score in these investible attributes is a good indication of the trading consistency of a trading strategy. 

The accompanying video goes into great detail using this valuable metric both as an investor and a trader. 

Brought to you by Darwinex: UK FCA Regulated Broker, Asset Manager & Trader Exchange where Traders can legally attract Investor Capital and charge Performance Fees.

Risk disclosure:

 Content Disclaimer: The contents of this video (and all other videos by the presenter) are for educational purposes only, and are not to be construed as financial and/or investment advice.

PROs and CONs of Commercial Expert Advisors Trading Strategy Analysis Trading Strategy Analysis

Trading Strategy Analysis using Darwinex’s Investible Attributes

The last post showed how to create a free user account to use Darwinex’s Investible Attributes for Trading Strategy Analysis. Before diving into this further, it’s vital that you know the basics to allow you to get the most from these tools. 

Firstly, you need to create a free basic account and link your existing trading account from your current broker. To Link your trading account, you can follow this guide.

Once you’ve completed a few simple steps, you’ll be able to analyse the linked account within 24-48 hours

Next, you’ll need to familiarise yourself with what each of the Investable Attributes cover. We’ll be covering these in detail, so keep your eyes on social media for updates. 

Should you decide that you want to compete for a share of Darwinex’s Prop allowance called DarwinIA, you’ll need to create a funded account with Darwinex.

Darwinex invests up to €45 million every year in the top 120 traders. Darwinex announces new allocations monthly, and the allocation is for six months.

As an example, NWO currently has €462,000 of DarwinIA capital allocated to it. 

This allocation is only available to Darwinex clients who have created a DARWIN. A further benefit of having a DARWIN is commission rebates. If your DARWIN achieves a 60+ D-Score at month-end, you’ll get a 40% reduction in commissions on ALL trading accounts. 

Back to the Trading Strategy Analysis

Deciding on the best entry and exit times is often an overlooked variable. If you use Trading Indicators, it’s hard to know if an earlier or later entry or exit would improve performance. 

Darwinexs’ Open Strategy/Close Strategy Investible Attributes have you covered. The (Os/Cs) IAs run a what-if scenario on each trade. What would the trade outcome be if I entered/exited earlier or later? 

I run a strategy that uses overbought/sold signals from a MACD; timing adjustment won’t help me. 

True, you can’t directly adjust your timing to an earlier entry. But you can Investigate other parameters within the indicator to see if changing the variables in line with earlier or later entries provides any benefit. If it appears your entering too early, you could delay entry after the signal is received. 

The (Os/Cs) IA excels in analysing time-based strategies entries, such as exploiting seasonality effects.

Let’s run a hypothetical scenario. 

The hypothesis of this strategy looks to open a momentum trade on EURUSD at London open and close at London close. If at 8 am Price is above the 20 SMA on the hourly chart, it goes long. If it is below, it goes short. The trade closes at 4:30 pm. 

In this scenario, the (Os/Cs) IA will rank the quality of entry/exit compared to simulated alternatives. The trade duration is 510 mins (8.5 hours x 60 mins).

The simulation runs ten alternatives in 10% increments of the trade duration (51 mins) from -50% to 50% on both the open and close time. 

So in this example, 7:09, 6:18, etc.

This simulation allows you to clearly and quickly see if your entry/exit times are optimum. You could monitor this monthly and try to forecast changes in the market, allowing you to adjust accordingly.

Alternatively, you could use this information to adjust entries and exits.

The purpose of using the Investible Attributes for Trading Strategy Analysis is to provide you with different levels of easily accessible and digestible trading information to allow you to make informed trading decisions

Whether you use these metrics to inform trading decisions or just use them as a filter to priorities your research effort. They’re available to you should you choose to use them. 

Brought to you by Darwinex: UK FCA Regulated Broker, Asset Manager & Trader Exchange where Traders can legally attract Investor Capital and charge Performance Fees.

Risk disclosure:

Content Disclaimer: The contents of this video (and all other videos by the presenter) are for educational purposes only, and are not to be construed as financial and/or investment advice.