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[HOWTOINVEST] Guide to passive investing Darwins


Senior member

Personal suggestion after 4 years trying to make money investing darwins:
Stay in demo for at least 6 months, 12 months are even better!


Disclaimer. While vast majority of the content here comes indirectly from Darwinex’s educational material (podcasts, articles, etc.). What I am writing here is the interpretation of the original content by someone who just arrived at Darwinex (me), so of course, it’s likely that I got some things wrong.

I have made an effort to be as true as possible to the original content, so I’ll be posting my own thoughts between these [].


  • Don’t invest in Darwins below 60-65.
    It’s a statistical environment: Dscore is designed to work for most Darwins, but not every, so there are going to be cases where Dscore doesn’t work (e.g. solid trading strategies with not so good Dscore and viceversa)
  • Invest only in Darwins with a 2, ideally 3 year track record or bigger.

  1. Avoid buying at historical or relative (3months) maximums. It’s been quantiatively demonstrated that is not the best way of investing. If a Darwins has made 15% in two months, the likelyhood of it having a flat or down period is high. This is no true for all Darwins. Possibly this is more true for auomated strategies than for manual traders. [When I first saw this community wanting to invest in Darwins after DD, I didn’t get it… It reminded me of the following question: Would you bet for tails, after 3 coinflips that result in heads? The truth is that in the 4th throw tails and heads have exactly the same odds as any other time: 50%. I understood Darwins are different in this matter due to the existence of market cycles in the market. So, if a strategy turned out very profitable in a given market-cycle, it is not so likely that the same strategy will turn equally profitable in the next (different) market cycle. I understood these market-cycles, in Forex, last few to some months and they tend to periodically show up again sometime after they end]
    [As I see it, while the outcome of a coinlip is determined by the laws of physics and result in a random system, the series of market-cycles are determined by a complex combination of human interactions, and there’s no guarantee for it being random, it is very likely that there are patterns in it. That make sense to me. I know it may seem like i am overthinking this, but to me it’s fundamental: Darwins are not like stocks which move according to offer and demand, I need to understand the fundamentals of why it’s a good idea to invest in Darwins in DD… I guess it is convenient that Darwins work like stocks in this matter, but it’s just coincidence, they do so for very different reasons]
  2. Do not set Stop Losses at an arbitrary % of loss. E.g. “If a Darwin loses 10%/15%/20%/25% I’ll sell it.” In passive investment, there’s no basis for doing that, DDs are normal. The only reasons to sell a Darwin (in this context) is when one detects the behavior has changed: Darwin no longer trades like it did when you took the decision of buying [I am not very clear on how would I detect a fundamental behavior change, so I’ll have to learn that].
  3. Watch out when investing in Darwins without DDs, it could be coming soon. Especially in those with an “Ex<10”. [I guess this is a bit redundant with not investing on Darwins with less than 2 years track record]
  4. Never invest in recently migrated Darwins and always watch out and wait to confirm behavior is as it was before migration. On top, if the Darwin trades in late market hours, be extremely careful (they could have been benefiting from special conditions in their previous broker). [Reading form the forum, I’ve noticed some experienced members of this community not trusting at all migrated track records. I’ll keep it in mind.]
  5. Beware of over-diversifying. Diversification is associated with ignorance, the less one knows, the more has to diversify and viceversa. The more Darwins you add in the portfolio, the more you dilute the good ones and the more reduce your risk, hence your potential returns…

  • Identify your risk tolerance. How much money can you lose in a period of time and be okay with it? E.g. 1000 eur a month.
  • Risk evolves with the square of time. VaR of 1000 euros a month is equivalent of 1000*sqrt(12)= 3464 euros a year.
  • Similarly, risk decreases with the square of the number of uncorrelated Darwins. Each Darwins has a target of (max) monthly VaR 10%. So the risk of a portfolio of 4 Darwins is 10%/sqrt(4)=5%.
  • Risk and Return are symmetrical. Greater risk tend to greater returns. He mentions a good Darwin’s portfolio should yield about 3 or 4 times the amount risked. *[Which I don’t fully understand… That would mean a portfolio of 4 uncorrelated Darwins would yield 5%*sqrt(12)3.5= 60% a year… which sounds like too much. I’ll dig deeper into this, I’ll like to understand better the relationship, and how to quantify it, between risk and return.]
  • Ideally, we should always operate at our maximum risk, set by our tolerance, not below: It’d be inefficient. [This I found profound, and applicable at life in general hahaha].
  • How many Darwins do I add in my porfoltio? Answer: As many as you find (that meet your criteria) as long as:
    (1) They are uncorrelated
    (2) They allow you to risk as much money as you wanted to, and not less. E.g. let’s say someone tolerates to risk 1000eur a month and finds 100 of incredibly good and solid uncorrelated Darwins, if all of them are added to the portfolio, the monthly VaR of the portfolio will be 10%*sqrt(100)=1%. Hence, to risk 1000eur a month, he or she should invest 100k eur (1% of 100k is the 1000 eur per month targeted to be risked)… But turns out he or she doesn’t have that much money!!! In other words, that person would have over-diversified: That person would have taken less risk than the one he or she can deal with, which is inefficient.

  • As a reference. In the context of a classic global investment portfolio (stocks, funds, etc.). One could invest about 20% of one’s risk tolerance in Darwinex.
  • His definition of passive investor: Someone who can’t dedicate more time than once a month to re-balance the portfolio. [But he never explained what he meant by re-balancing the portfolio or how to monitor it. So sad… Sounds somewhat important.]
  • He says the biggest opportunity in Darwinex is the active management of Darwins. Cause they are a kind of investable asset a lot easier to predict than others. [Oh well, I gotta start somewhere: passive investment].
  • A passive portfolio of Darwins must be tried out for at least a year, to see if it works. [I understood the main point behind this if for you to see that the decorrelation of the Darwins in your portfolio is real throughout the different marketcycles… A potential issue is when you think you have diversified in choosing your Darwins but actually many darwins of the portfolio behave similarly, for example, they all have a similar exposition to volatility].
  • All Darwins should have the same weight in a portfolio. If there’s a Darwin you’d underweight, take it out.

[I found this very educational, but quite complicated relative to the previous points. I would love to hear from anyone in the community, if they find this attempt at categorizing Darwins useful at all and thoughts on this specific approach. Also if someone did the Passive Investment course, would be awesome to crosscheck our understanding in this matter].

By type: He seems to have identified the top 3 different and clear types of trading strategies that have proven to be successful in Darwinex so far (up to summer 2018).

  • Type 1. Volatility Darwin. They depend a lot on (Forex’s?) volatility to win. E.g. DLF, PGH, VQB [important to notice, that all Darwin examples given in this section were given by him, not by me]
    How to identify:
    -Very high “La”
    -“Ca” above 4
    -Positive correlation between such Darwin and DWC. So if Darwin wins when DWC wins and vice versa, such Darwin could be a Type 1 Darwin. He says the correlation between DWC and Forex’s volatility is very very high, they move very similarly. [he said so in summer 2018, not sure if he would think differently now].
    More comments
    -They look for strong trend movements.
    -They tend to not win/loose much most of the time and then win a lot when volatility is high.
    -Many good Darwins in Darwinex are like this, is important to identify them to not over-invest in them in a portfolio.
  • Type 2. Snipers. Few trades a month. E.g. NTI, ERQ, STV
    How to identify:
    -Very low “Ca” (between 0 and 2)
    -Very good Cs and Os – [As I interpret the audio, this seems to be connected with these traders operating against the trend (in Spanish: contra tendenciales). Not sure]
    -Few trades per month
    -They tend to have small DD
    -They start trading a lot and as time passes the trade less and less [I wonder why is that… It would make sense for me if they trade more or less depending on the current market-cycle, but if Javier is suggesting that these Darwins will trade less and less indefinitely, I don’t understand why that would be true.]
    More comments:
    -They look for very short term inefficiencies
    -Type 2 Darwins tend to be uncorrelated between them
  • Type 3. Semi-Snipers e.g.UYZ, GLX
    How to identify:
    -Low “Ca” (between 2 and 4)
    -Not bad “Cs” and “Os”
    -Not bad “La”
    -They trade more than snipers, but still relatively little.
    More comments:
    -They are not so picky when it comes to opening positions
    -Their positions have certain excursion (in Spanish he said “recorrido”)
    -But they are not looking for explosive movements
By asset. Most Darwins trade on Forex but some also trade indexes and raw materials. It’s good to have good darwins like that in the portfolio. E.g. OOA, SYO.


  • I will invest only in Darwins with track record bigger than 3 years, 2 is not enough. Also, I may be more stringent with this and other criteria if some of those 3 years are not native (because I don’t know, yet, how to spot a potential change of behaviour prior vs after migration).
  • At least during the first year, I’ll not invest in Darwins which have caused some controversy within the community (eg. ZVQ).
  • Using an analogy with (stocks) Value Investing, to me, the fundamentals of a Darwin are the Humans behind it. So I am going to look for and value qualitative signs of professionalism/seriousness/honesty/right-attitude in the human(s) behind a Darwin.
  • With the intention to try achieve a truly diversified portfolio, I’ll include the following aspects to my analisis. Hopefuly is useful, I can’t tell before I do it and look at it.
    -How did the Darwin perform in a period when the Forex volatility was low? First half of 2018.
    -I will analyze when did the biggest DD of each Darwin happen and avoid having two Darwins that have all their big DDs and high return periods at the same time. I would conclude, they both suffer/benefit from the same market-cycles and hence they are correlated. Theoretically, this could happen even if they trade completely different strategies.
This was an attempt to sumarize the key points of what I learn in my investigation and what I’ll be basing my decisions on. I hope is useful for others, with this intention, I’ll be editing it as i refine my understanding or I receive feedback.

In the next posts I’ll share my Darwins’s analysis. After that, I’ll reflect on different combinations of the analyzed Darwins to ultimately end up chosing my portfolio for the first year.

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Active member
The investor who wrote all that didn't report back about his results achieved so far,so take it with a grain of salt.His writing was heavily influenced by one of the bosses of Darwinex who proved to be incapable of composing winning portfolio so far.


Senior member
These guidelines are not enough to make money but I can't find nothing wrong so they are a valid starting point.
If young investors would foolw these insted than dream on unlikely smoth trackrecords they would lose less money.
These guyidelines can prevent you to waste 6 12 months of time but the Grail is still far away.


Well-known member
I don't know if I can compare stock investment with darwin assets class. I don't have any experience with darwin investment but I use three strategy for stock investment.
I will share these three strategies for stock investment in next few posts with clear rules for stock selection, entry, exit, risk & money management.
These strategies may be helpful for darwin investment.
My purpose to share my stock investment strategies to encourage rule based investment in place of any random entry and exit.


Well-known member
I divided the stock investment strategies based on average holding period.

1.Holding period few weeks.
2.Holding period few months
3.Holding period few years.


Well-known member
Strategy Name
- Value Investing

Investment Philosophy- Investment in previous quarter performing stocks after drawdown.

Stock universe- NQ100 or S&P500 or any index of your choice.

Stocks Selection- Select stocks on any index whose ROC(70 days) is above 15%. We can call these stocks as performing stocks in previous quarter.

Entry- Enter the stock when there is drawdown of 5% or 10% or 15%. Lower the drawdown entry criteria higher the trade frequency and Higher the drawdown entry criteria lower the trade frequency.

Exit- If you enter @5% drawdown then exit after 05 trading days( one week).
Similarly if you enter @10% drawdown then exit after 10 trading days( two weeks) and so on.

Max Open Position- Keep the max open position @5% of Nos of Stocks for index. For example for NQ100- Max open position should be 5, S&P500-Max open position Should be 25.

Money Management-Suppose you have capital of $10000 then investment per stock should be Capital / MaxOpenPosition. For example -for NQ100 universe investment per stock should be $2000.

Risk Management- Use protective stop of 5ATR(20 days) from entry price. This stop mostly not hit, It is only for protection from extreme volatile market condition.

This is not an investment advice, I share this strategy for educational purpose only.
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Senior member
I think persistent edge exists even if often it fades and that is the reason I have exit rules.
There are darwins with 10 years trackrecord and the Dunn hedge fund has 30 years trackrecord.


Experienced member
Just fund this old article by Juan Colon
old but i still valid
That was written with another risk manager, other DD and recoveries and traders with a current alpha in the markets.

What would Juan write today? :)
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