How it works

A DARWIN is an investment strategy.
Whenever a trader (the DARWIN’s provider) trades a foreign currency, commodity or equity index on his account, investors in his DARWIN trade that asset, on theirs.
DARWINs and their underlying strategies share asset choice and timing, but differ in two aspects.

The first difference is the so called divergence: there is a 100 ms delay between original and investor replica trade, during which markets (can) move.
The second difference is risk management. DARWIN providers leverage their account as much (or as little!) as they choose, but leverage for DARWIN investors is set independently by Darwinex algorithms.

Our risk management algorithms manage investor trades’ leverage for all DARWINs to always risk the same on a monthly basis. This makes DARWINs apples-to-apples comparable for risk and about twice as volatile as a stock in the FTSE 100 or S&P 500.

Results refer to past simulated performance. This is not necessarily an indication of future results.

HOW DO DARWINS WORK?

DARWIN PROVIDER TRADES HIS ACCOUNT

Following his intuition or using one (or multiple!) algorithms, the provider trades his live Darwinex account. We send his order to the interbank market for a brokerage commission.

Placing every trade in the open market aligns our interests with the traders’ and allows investors to independently verify any track-record with our Prime Brokers and technology providers.

DARWIN RISK MANAGEMENT

In the 100 ms that follow, our patent pending risk management engine calculates how much volume of the asset traded by the providing trader to buy/sell for each DARWIN investor.

It takes into account historical trading patterns for the strategy, prevailing market volatility for the asset to be bought and its correlation to any assets to which the strategy is then exposed. The goal is for DARWINs to have a 1 in 20 chance of losing more than 20% over any given month.

INVESTOR AGGREGATION

Our broker sends a block-trade to the market for the sum of all volumes by all investors in that DARWIN, at that time.

If the trade size is too large relative to then available market depth, our execution engine breaks up the block-trade in sub-trades. Their execution is sequenced over time to optimise volume weighted average price.

PORTFOLIO RE-DISTRIBUTION

Once the last sub-trade has been confirmed in the market, every investor account is credited for the same volume weighted average price.

The DARWIN’s public quote and the profit & loss (P&L) account for each investor is updated by the trade’s outcome. Investors are free to immediately liquidate their holdings 24 hours a day, 5 days a week, with no other penalty than the commission applicable to their close order.

DARWIN DIVERGENCE

Market prices rise and fall during the 100 ms used by the risk manager to calculate the investor replica trade. This creates DARWIN / investor performance divergence.

When little investor capital tracks a DARWIN, divergence is both negligible and random - sometimes investors lose out, other times they win. As investor volume in a DARWIN grows, investors systematically lose out as their volume adversely affect the market price.

We track and disclose divergence for every DARWIN individually and in aggregate for every investor portfolio

DIVERGENCE PROTECTION

Even in the world’s most liquid markets (foreign exchange, commodities and stock indices), liquidity is finite. The more volume in a trade, the more market depth is used up and the less favourable the marginal fill price.

Once a DARWIN reaches an asset under management threshold so large that investor divergence becomes excessive, the DARWIN is closed for new investment. This protects both DARWIN investors and provider performance.

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Forex and CFDs are leveraged products. They may not be a suitable investment for you as they carry a high degree of risk to your capital and you can lose more than your initial deposits. Please make sure you understand all the risks involved. The Darwinex® trademark and the www.darwinex.com domain are owned by Tradeslide Trading Tech Limited, a company duly authorised and regulated by the Financial Conduct Authority (FCA) in the United Kingdom with FRN 586466. Our Company number is 08061368 and our registered office is Acre House, 11-15 William Road, London NW1 3ER, UK.