What do the Return and Duration Consistency (R+/-, Dc) attributes tell about a trading strategy / DARWIN?

These attributes analyse behavioural patterns associated with the traders decision to close positions.

The Positive Return Consistency (R+), Negative Return Consistency (R-) and Duration Consistency (Dc) attributes analyse behavioural patterns associated with the closing of open positions. They measure the dispersion / concentration around the length of time a position remains open and the return in pips of the positions.

These attributes are scored from 0-10 and take into account the last 3 D-Periods of Experience (Ex).

1. Positive Return Consistency (R+)

R+ analyses the decision to close positions in a given asset which have generated a positive return.

Greater consistency in the closing of winning positions in terms of the return in pips indicates that the trader is being systematic in his decision making, using pip return as the criteria. This gives rise to a higher R+ score.

Placing Take Profit orders at a similar level across positions in a given asset will result in an excellent R+ score.

2. Negative Return Consistency Negativos (R-)

R- analyses the decision to close positions in a given asset which have generated a negative return.

Greater consistency in the closing of losing positions in terms of the loss in pips indicates that the trader is being systematic in his decision making, using pip loss as the criteria. This gives rise to a higher R- score.

Placing Stop Loss orders at a similar level across positions in a given asset will result in an excellent R+ score.

3. Duration Consistency (Dc)

Dc analyses patterns in respect of the length of time a position in a given asset remains open.

Greater consistency in the closing of positions in accordance with the length of time the position has been open indicates a systematic decision making based on time. The higher the consistency the higher the Dc score.

Where can I see this information? 

As with the rest of the Investable Attributes, you can access this information via the icons in the top right of the DARWIN or Underlying Strategy profile. It can also be consulted from within the profile via the ["Investable Attributes" / "R+" / "R-" / "Dc"] path.

¿Dónde puedo ver los datos de los Atributos Invertibles de R+/R-/Dc?

Return Consistency +/-

Looks for return consistency in pips* when closing positions in a given asset. In this graph you can see the last 50 winning positions (represented by green bubbles) and the last 50 losing positions (represented by red bubbles).

*Calcuated as: [(Close price - Open price)/(Open price)] *10000

In the illustration below you have an extreme example of perfect R+ and R-.

Consistencia en Retornos

Duration Consistency

Looks for a consistency in the length of time a position remains open. In this section you will see a graph with the last 100 closed positions.

In the illustration below you have an extreme example of perfect Dc

Consistencia en duración

Size of the bubbles

The calculation of the score for these three Investable Attributes depends not only on the dispersion / concentration of decisions, it also takes into account the relative importance of the position versus other positions.

By doing this we avoid penalising Consistency scores where there are outlying positions so long as they not representative of the overall observed pattern.

Snip20180918_111

The size of the associated bubble gives us an indication of the relative weight of each position in the strategy.

The formula that determines the size of the bubble is:

[(Leverage * √duration * VaR DARWIN) / (VaR of Underlying Strategy at close of the position)]

Examples of R+, R- and Dc scores

If you are a DARWIN investor you should know that good R+, R- and Dc scores imply clear and systematic criteria when it comes to closing positions.

You may however come across DARWINs that have good scores in the Risk Stability, Risk Adjustment and Loss Aversion attributes, but whose R+, R- and Dc scores are not so high.

This can occur with strategies that use variable return targets that may depend on the level of volatility or the strength of a trend. These situations ordinarily lead to greater dispersion in position returns and therefore lower R+, R- and Dc scores without necessarily implying that the trading strategy is a poor one.

High Dc Score

This DARWIN has a Dc score of 9.8 and it can be clearly observed that the underlying criteria for closing trades is based on time and not the return.

Ejemplo Consistencia en Duración

High R- score

Here you can see a DARWIN with very consistent negative returns and little dispersion indicating losses are strictly controlled. Positive returns on the other hand are less concentrated.

Ejemplo Consistencia Retornos Negativos

High R+ and R- scores

This DARWIN is particularly meticulous in terms of closing positions based on returns. In spite of what you might think, the graph does actually show the last 50 winning and last last 50 losing positions.

Ejemplo Consistencia Objetivos Fijos

Low scores in R+, R- and Dc

In this last example we show a DARWIN which employs no apparent time or return based criteria for closing positions. Some positions have been closed in minutes, while others have been open upwards of 40 days., while some have generated just a few pips in profit or loss while others have reached almost 200.

Ejemplo Mala Consistencia

Tips

1. Combining strategies

The algorithm detects multiple centres of consistency. As such a trading account that simultaneously operates various strategies with different Stop Loss / Take Profit / duration objectives will not necessarily see an excessive penalization in its R+ / R- / Dc scores.

Nevertheless, there must be consistency within the individual strategies in order to obtain a good R+ / R- / Dc score. We can see an extreme example of this in the illustration below:

Consistencia Varias Estrategias

2. Trades vs. Positions

R+ / R- and Dc scores are calculated on the results of positions in an asset. The graphs in these specific sections represent positions but it is also possible to see graphs at the individual trade level.

To access this trade level information, ["Assets & Timeframes" ] tab.

For more information on the difference between Trade and Position, please see this article.

Consistencia Operaciones

3. Pip value standardization

In Darwinex you can trade diverse assets with very different price levels. For this reason we have standardized the pip value calculation in accordance with the following formula:

Pip value = [(Close price - Open price)/(Open price)] *10000

Consequently although you might close positions with a similar pip value return, if they reference different assets you might see some dispersion in the R+ / R- graph.

Let's look at some examples in all of which the position is closed with 50 pips return.

Pipo unitario EN-1

Want to know more?

If you want to know more, check out the following webinar from minute 19 onwards.