In the previous post on trading consistency, the focus was on the consistency of returns. A strategy with the same fixed take-profit and stop-loss levels will generally have a high returns consistency.
However, not all strategies follow these fixed take-profit and stop-loss levels. Seasonality strategies, for instance, usually have time-based entries and exits. The entries and exits will be at the same time of day, or week, or month. Similarly, the exit criteria will usually be at a specified time.
A strategy that opens a trade at London Open and closes the trade at London Close is an excellent example of a seasonality trade. Now, this strategy trades in a consistent manner, but the returns will have a higher variation than a strategy that uses a fixed TP/SL.
Does this mean that a lower returns consistency means a lower trading consistency?
Not at all; it just means another way of measuring it is needed. For this reason, Darwinex created the Duration consistency (Dc) Investible Attribute. The (Dc) IA measures the consistency of when a trade is closed based on using time as a factor, not the returns.
With this in mind, it’s reasonable to assume that a DARWIN with a high (Dc) score may not have a high (R+/R-) score. As an investor, you can use this knowledge to provide clues on how the underlying strategy may operate.
Of course, the underlying system may have multiple components, in which case it may have high or low scores in both Investible Attributes. The key take-home point here is that you have tools at your disposal to help you make informed choices.
As traders and investors, that’s all you can do. Make the best decisions you can with a suitable amount of information and data.
If you need further insight on Darwinexs’ Investible Attributes, don’t hesitate to reach out to us at firstname.lastname@example.org and we’ll be happy to help.
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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.