When you sign up with Darwinex as a trader or investor, the first thing you notice on reviewing strategies on the platform is the Darwinex Score. The score is a unique ranking structure designed by Darwinex to tell you at a glance, the quality of the strategy you are looking at and the habits of the trader or the underlying expert advisors.
The Darwinex Score is a computation of 12 different metrics known as investable attributes as displayed in the image below.
What do these metrics mean?
By hovering over each one on a Darwin’s page, you will get a brief rundown of what each one means. This blog post, however, throws more light on each from a third party perspective.
This is unarguably the most important attribute on Darwinex. It is a massive driver of the D-Score. It shows if you have taken enough individual “representative trading decisions” for the strategy to be deemed mature enough.
To get the full EX score, you need 250 individual trading decisions over 12 D-periods (Darwinex Periods). Like all the others we will go through, the calculations that go into this are only fully known by Darwinex. However, there are a few things you should keep in mind about the EX.
Firstly, trading decisions do not mean the same thing as the number of trades. You may have 1,000 trades with an EX of 6 while someone else has 200 trades with the full EX of 10. 20 trades entered at once and closed at the same time in future will generally be treated as one trading decision.
Secondly, trading decisions are what drive the EX. You need to keep an eye out for how your trading is interpreted so you can know how long it will take you to achieve the full EX. This is of course only necessary if you started a brand new trading account. If you have an old account with history covering over one year, it is likely that you already have the full EX.
If you are a new trader, however, taking a trade every day and maintaining roughly the same duration on all trades, can take the EX from 0-10 in 9 months or close. If your trading doesn’t have a fixed time scale, as is the case with many long term and manual traders, it could take up to two years or more to achieve EX 10.
To find out how long it will take you to gain full EX, look to the right of your screen for the statistics when you click the EX attribute, as shown in the image below.
In simple terms, this attribute checks if your strategy is dependent on trading in one direction on your chosen assets (pairs/instruments). If you only enter buy positions on the EURUSD for example, the attribute will penalise you.
This attribute measures the uniformity of the risks you take by monitoring the Value at Risk (VAR) reading of your strategy. The VAR is the projected maximum loss of your strategy for a month. It is not set in stone obviously, but the algorithm places a value by monitoring elements of your risk management like the number of open trades and trade sizes.
If the VAR of your strategy climbs or falls too quickly, this attribute will penalise you. Poor risk management is generally the chief reason for a low RS score.
However, your RS will also suffer if you suddenly increase the balance on your account, without adjusting your position sizing to reflect this change. So for instance, if you trade 0.1 on a $1,000 account and then continue to do so after suddenly adding $9,000 to your account, your RS score will be penalised. The images below show a high scoring RS chart and a low scoring RS chart.
On Darwinex, all strategies are copied uniformly to a 10% VAR. If your trading strategy takes too much risk or too little risk, this attribute’s chart will show how many times the Darwinex risk engine had to step in to ensure your trades are in line with the 10% VAR. A strategy with the RA chart looking like the image below will have a score of 10 or close.
OS/CS-Open Strategy and Close Strategy
These attributes show if a strategy enters and exits the market at the right time. The problem, however, is that most strategies will score low in them. If everyone knew the optimal times to enter and exit the market, there wouldn’t be a market. Strategies that rank high here usually enter multiple positions as the market moves away from a certain mean level. Strategies that target reversals consistently and are relatively successful at it will also rank highly here.
R+/R- Positive and Negative Return Consistency
This is straightforward. If your strategy incorporates fixed stops and fixed targets, you will have a high score in these attributes.
DC- Duration Consistency
This attribute takes note of the consistency of your trade duration. If you close all positions after 6 hours for instance, you will have a higher duration consistency than someone with a strategy where the forex market strictly determines the length of individual trades.
As the name implies, this attribute confirms whether you allow losing positions to run longer than winning ones. One of the worst things about social trading is managers that allow losing trades to keep running forever while they close out lots of smaller traders to maintain a high accuracy rate.
This attribute ensures that such managers can’t hide. Just looking at its chart and the attendant statistics will show any such behaviour. The LA score will be lower if trades stay longer in the negative territory than they do in the positive territory (known on Darwinex as “negative and positive excursion”).
The attribute does what it says on the tin: measuring the performance of a strategy against 1000 other random strategies. The strategy will score high in this attribute if its return in the period under review is close to the highest band. It says at a glance if a strategy is doing well NOW or not.
This attribute mostly shows how much capital a strategy can handle before divergence begins to weigh down on the returns. The capacity chart shows the evolution of the capital a strategy can handle and also outlines how the strategy will be affected by varying degrees of divergence, from 0.2 pips to 2 pips.
These are the Darwinex Investable Attributes. Do you have any questions? Let us know!