Calling Time on my Darwinex Project

All time slog

After some considerable time and effort to get to know my Darwin “WET” the synthetic trading algorithm that is supposed to emulate the best parts of my trading account for investors to “trade” with I have decided to take a break from it and focus my attention on a couple of proprietary trading firm offerings from MFF (my forex fund) and possibly FTMO, although I think FTMO need to address their qualification model to eliminate the need for excessive risk, i.e. gambling to get funded. If you want real traders, provide real conditions…

The Darwin model used to provide some promise but sadly the risk manager just isn’t viable for my trading the style, the last 4 trading months have produced 5% return compounded weekly but has shown pretty much zero return for an investor. Couple this with a 1% annualised management fee and a 5% trader fee it just doesn’t make sense for me to invest my time anymore.

Below is a snapshot of WET invested over a period of exactly the same time/amount as two of the most heavily “invested” and most popular DARWINs based averaged in $500 dollars per week over ten weeks and then held:

WET out performed both at the end of July when I stopped trading, this isn’t unusual as there are many talented traders on Darwinex that out perform the top followed Darwins, the fact is there just isn’t enough investment and diversity of funds across the breadth of strategies available to trade. This is evident from the payout page listing the top earning Darwins, only 8 have earned over 50k euros at the time of writing this post and the average time for this is over a 3 year period.

I do feel perhaps Darwinex was before it’s time and somewhere their own strategy got lost in translation in what it tried and continues to try to do. I hope to return soon when conditions are more appealing but in the meantime the most valuable thing I have is time and for now I have to invest that with another funding solution. Adiós por ahora 🙂

Cable 2021 H2

GBPUSD 2021

Cable has breathed a huge sigh of exhaustion after a heady 3 years… Covid, Trump, Brexit, FED. It’s all happened and this year has given me time to plan and map out the next 6 months.

We are at the same highs of Q1 2018 and having formed a double top it will be interesting to see where we go from here. Personally I’m hoping we will hold this range of 1.36 to 1.42 for the remainder of 2021, if it does I’ll make plenty out of it.

Look at this chart below, we clearly have some consideration to the following…

The absolute line in the sand first tested by the Brexit Article 50 announcement in October 2016 and then the 2020 Covid lockdown announcement is about the 1.14 level.

The pound is then bought successively with an implied volatility of some 2800 points and then sold off to the 1.26 level, sold again and then capped four times at 1.33 before been bought again.

We are 5 months into the the current cycle of this 2016 Q2 range extending it’s duration longer than last time. The catalyst to move money up from this level was way back in 2008 but this bounce was on the back of the shocking credit crunch drop in November 2007 from the heady heights of 2.11 (that was the time to go to Universal and Disney!).

Longer term plays for me will strictly be range bound systems, so far the pound seems to have evaded the value buyers below 1.14 but if we visit there again, you know what I’ll be doing.

Sometimes it’s just a grind – Darwinex Account

Quarter 1

I like trading most of the time, I commit hours and hours to it. I do sometimes wonder if I have lost my mind though and this year has been a bit like that trying to make my Darwin asset WET fit in and perform.

No excuses here but it’s just been tough. I pretty much just specialise in GBPUSD and to get intimate with it you have to go through the emotional ups and downs of the pair. I’ve seen volatility drop to a mere 45 pips a day recently which is 50/70% down on what we normally trade within. So when this happens life gets tough.

However the bright side of only trading one pair is that as a strategy begins to mature you learn to love the ugly side of the partnership. That’s where I think I’m at now, I’m happy with what I have created and the drawdown will just be a fact of life; my style of trading at Darwinex. People can either live with it or live without it, my faults in the past have been trying to guess what Darwinex want but I can’t, so I’ve stopped trying to figure out the mystery. What will be, will be…

Changing Gears

I think Lao Tzu said something like “If you do not change direction, you may end up where you are going.”

I’ve spent time reviewing my strategies which work well for me in my other accounts away from Darwinex and compared them with the performance of the Darwin WET. It is evident that the risk manager works well during times of drawdown but is painfully slow at returning at a rate I find unacceptable to increase more risk for better returns. Any form of flexibility or dare I say creativity is simply SQUASHED!

A long term strategy can and does take days/weeks/months to formulate to get the best return. I think active exposure to the market is evidently penalised at Darwinex, any edge I have with this exposure is quickly eroded with an equity recording at month end. When it comes to pounds and pence the logic doesn’t align with my own trading. If a drawdown is recorded on day 31 it’s printed, price hits target the next month and a high is printed. I re-enter on a different asset and the VAR begins to raise reducing any chance of increasing returns in the Darwin. The lag in the VAR risk manager is impossible for me to accommodate effectively using two of my position and swing trading methods.

I am pulling these parts of the strategy from my Darwin WET and have implemented back into it my day trading methods I used earlier in the year. It will be interesting monitoring the VAR over the next 60 days and the Darwin performance.

The limitations of the Darwinex algorithms are very evident when matched with part of my discretionary style. My capital capacity will likely plummet but the performance will increase for small scale trading.

As for how Darwinex interpret my trading, let us see! I’ll give this project another 9 months before I make a decision on the merits of time spent at this.

Toil and Trouble

Dollar weakness continues to dominate the global currency markets, will the seasonal trend of global accumulation of the greenback pre-election change the course of the decline? The FED printing presses are at full tilt so who knows..?

Pulling back against the weakness

The weeks still continue to test my strategies and resolve as a trader. You either have already developed a mental toughness to survive or you need to. Dealing with the inner turmoil when things aren’t going to plan is where you need to be on high alert to making decisions on the spur of the moment. It is very easy to do and often (if you are lucky) a confirmation that you have made a good decision when in fact all you were was just lucky. If you make that call, get unlucky, then that is when you can spiral out of control.

As a discretionary trader I plan trades based on systematic entries and the statistics of past outcomes to provide a level of probability for the trade idea. The markets in 2020 will be remembered for testing every trading idea I have ever come across and executed.

Working through sustained and deep drawdowns despite all of the macro and fundamental data being in your favour defies the logic, the intelligence and eventually the endurance you have invested in the time putting it all together. Oh and it costs money!

I have been working my plan to pull back into the green and on every occasion of just about getting there the market draws away from me, literally within a few points…. So the evolution continues to play out with my trading plan and strategies are scrutinised as objectively as I can manage under the circumstances. Each time we should continue to chip away and the evidence of growth is beginning to show its tender shoots of promise.

As we move into Quarter 4 my intention is to eliminate direct USD exposure before the crazy lead up to the US Presidential elections and have positions in cross pairs which can be hedged out nearer the time. The investor value at risk for my Darwin WET has been much too high and I will attempt to bring that back down in the next 3 months.

With Covid, US Elections, futile FED and ECB battles of inflation management, potential regional unrest with Turkey(as well as a failed Lira which Europe has exposure) Brexit and more economic/political pressures for the Euro looming on the horizon we will have to be patient for trade ideas to play out long term and mature in our outlook when trading or investing in such an arena.