Imagine accessing the diary of a person you had never met before: wouldn't this afford you in-depth insight into the personality traits of its owner?

At Darwinex that got us thinking: how about a tool providing in-depth insight into any trading strategy?

Thus came about the Trading Journal: it's a visualisation containing all the trades in a trading strategy, providing insight into its main attributes - particularly its Risk Management - at a glance.

This is what it looks like (just click the image to enlarge it!) and these are its elements.

Return:

Measures the strategy's performance from inception, tracking the value of balance every time a trade is opened or closed (i.e. when a new position starts). The performance calculation takes into account (i) the performance of a trade when it has been closed AND (ii) the performance for the trades that remain open when a trade has been closed.

Range Return:

Shows a strategy's performance over any user-selected period - offering any potential investor a way to track performance for any period of interest... which comes in handy since recent performance mostly differs from performance from inception!

For instance, a strategy initially losing 50%, the recovering to 100% of the initial deposit could yield 100% performance to investors entering at the lowest point! Range Return is designed specifically to get a more accurate impression of a trader's performance.

D Leverage:

D Leverage is a measure of risk. It tracks the risk incurred by each position in a strategy in terms of average EURUSD volatility. What does this mean?

• A EURUSD trade with 1:1 utilised leverage has a D Leverage of around 1
• A EURJPY trade with 1:1  utilised leverage has usually a D Leverage higher than 1 - this is because the EURJPY is more volatile than the EURUSD in average - and thus riskier
• What is TS Leverage for simultaneous trades in multiple assets? This is where it shines: D Leverage of 6 means "6 times as risky as the EURUSD over the period", etc. It captures hedging effects, i.e. two highly leveraged trades in negatively correlated assets can result in a low risk trade

What does a constant evolution of D Leverage say about a strategy? The closer a trader sticks to a D Leverage, the better - this evidences that any positive returns are not engineered by leverage illusions (martingales), where winning trades randomly deploy higher leverage than losing ones.

The D Leverage chart on the Trading Journal uncovers strategies deceiving inexpert investors through such illusions: beware of strategies where D Leverage increases on losing positions.

Open trades:

Tracks the number of simultaneous open trades in a strategy. Combined with D Leverage, it is proof of a trader's skill at keeping risk constant: good traders open new trades without affecting their D Leverage. In short, this is a powerful tool that evidences a trader's ability to cover risk by opening new trades (hedging). Beware of strategies in which D Leverage increases with new trades: this is conclusive evidence of the presence of leverage  illusions (martingales).

D Score:

Tracks the evolution of a trader’s D Score. Our goal is to maximise the correlation between a strategy's current D Score and future returns: our success will empower traders with a high D Score to investor capital!

For now, we offer users a predictive tool of immense potential: the evolution of D Score. Please remember that the D Score is driven by performance and skill: expert traders must prove both to be worthy of investors' capital.

Distribution of trades:

This chart is useful to know at a glance what kind of strategy a trader uses: frequency of trades, assets traded, duration of trades and simultaneous trades.

It evidences whenever a trader has changed his strategy and is also helpful to find out whether a trader is disciplined when following a strategy.
The trading strategy below shows a good discipline. Note how this trader started trading short trades and kept the number of open trades at a time consistent. Note also how his strategy changed: he increased the number of trades open at a time, being the duration of the trades longer.

In contrast to the disciplined strategy above, the strategy below shows no discipline at all. The number of open trades at a time varies constantly and the duration of the trades varies as well...you can tell at a glance there is no defined pattern.

Do you have any question about the Trading Journal? Feel free to e-mail info@darwinex.com, we'd love to improve on the above intro.