What are the differences between Darwin SMI and its underlying strategy?

What are the differences between Darwin SMI and its underlying strategy?

As we have tried to explain, one of the many value contributions that Darwinex makes is managing, thanks to its risk manager, the risk of the trader's strategy (which we call underlying). Dawinex manages the investor's risk by normalizing it to a known risk level (between 3.25% and 6.5% of monthly VaR with a confidence level of 95%).

Objective that Darwinex pursues with this limitation, in our point of view, is to protect the investor that the trader at a specific moment assumes a greater risk than usual by taking larger positions (greater investment per operation or greater number of operations) and it has a negative impact on the investor's profitability.

By normalizing the level of risk, Darwinex make a second contribution to the investor is that they offer a set of investment possibilities (darwins) comparable to each other, although the traders' strategies are very different from each other.

In this way also, the investor knows in advance the maximum risk level of his investment in a darwin, Darwinex fulfills its responsibility as a Capital Manager towards its investors and the manager aware of said limitation must propose his strategy focused on his darwin .

darwin XIC already takes into account this risk limitation and positions we take take into account management that Darwinex will carry out of the risk and therefore both number of operations we take and lots (investment in position) are designed to maximize return on the darwin, not the underlying strategy.

What if the risk of the trader is greater than the risk of the Darwinex risk manager?

When Darwinex risk manager has to act (since if it did not act, the maximum VaR would be exceeded), it will partially close open positions or open new operations with a lower lot so that darwin risk does not exceed said level.

What if the risk of the trader is less than the risk of the Darwinex risk manager?

It will do the opposite, that is, it will take higher positions (higher lot) than the positions by the trader.

Hence importance of that underlying account goes to the background and all decisions on number of operations and invested capital have as their objective performance of darwin, leaving underlying strategy in the background.

You can see the following video of Juan Colon (one of the founders of Darwinex and visible head), I think this concept will be very clear to you. I'm sorry it's in Spanish, you can use YouTube subtitles, if necessary...

And expand the information in the following link:

https://help.darwinex.com/darwin-vs-its-underlying-trading-strategy

This website is created to explain in detail What is SMI? and its operation. We recommend you visit it since we have tried to answer the questions that an investor might have. In no case should it be taken as an investment recommendation or as a financial promotion, but rather as an explanation of how the trading activity underlying the darwin SMI works. https://www.darwinex.com/legal/risk-disclaimer / https://www.darwinex.com/legal/investors-agreement

The Darwinex® trademark and the www.darwinex.com domain are owned by Tradeslide Trading Tech Limited, a company authorised and regulated by the Financial Conduct Authority (FCA) in the United Kingdom with FRN 586466. Company number is 08061368 and registered office is Acre House, 11-15 William Road, London NW1 3ER, UK.